Plaintiff v Defendant

2 On 17 August 2012, Almond J ordered, by consent that, among other things, a number of questions regarding the financial affairs of the partners be referred to an associate judge, following which an account was to be taken of all of the partnership dealings and transactions between the partners from the date of the commencement of the partnership to the date of the partnership's dissolution, being 26 March 2012.

3 LHND was incorporated in 2002. The shareholders are Louis and Hannah New. The defendant, MYR, is an entity controlled by Moshe and Yvonne Furman. Moshe Furman has been active in the construction and the property development industry for a number of decades. Mr New and Mr Furman met in the late 1960s after Mr Furman arrived in Australia. Mr Furman is related by marriage to Mrs New, and the New and Furman families have socialised together regularly over the years.

4 In or about 1999, Mr New and Mr Furman agreed to conduct two joint ventures to develop residential properties, both in Charman Road, Beaumaris ("Charman Road"). The arrangements between the parties were governed by written joint venture agreements, which in one project was between Ovid Nominees Pty Ltd and Furlap Pty Ltd, and between Overleigh Pty Ltd and Furlap Pty Ltd in the other project. In both cases, the land was purchased by Ovid or Overleigh, entities controlled by Mr New. Entities associated with Mr Furman provided the construction and project management services for the projects, and the parties agreed that the profits of the projects would be shared equally between them. As well as providing the land, Mr New also arranged financing for the development of the properties, and his accountants, Green & Sternfeld, provided the accounting services for the projects.

5 In August 2002, the parties completed the purchase of a property at Poath Road, Hughesdale ("Poath Road"), which was ultimately developed and subdivided into five residential units. This property was purchased by LHND and MYR as tenants in common in equal shares. There was no written agreement between the parties regarding the Poath Road project, but the project was accounted for by Green & Sternfeld in the same manner as the Charman Road developments, that is, as if LHND owned the property, arranged financing for the development, and paid the expenses, and entities associated with Mr Furman provided construction and project management services. The question of whether the Poath Road project was conducted by the parties as a joint venture, or was the first project of the partnership between LHND and MYR, is an issue in dispute between the parties.

6 It is common ground that the remaining development projects undertaken by the parties were conducted as a partnership. In November 2003, LHND and MYR entered into a contract to purchase a property as tenants in common in Hastings, which was settled in 2004. At around this time, Green & Sternfeld registered L & H New Developments Pty Ltd and MYR Investments Pty Ltd as trustee for the M & Y Furman Family Trust as a partnership with the Australian Taxation Office ("ATO"), with the date of the commencement of the partnership business nominated as 19 February 2004.[1] The next property purchase was completed in December 2004, being a property in Mordialloc. This property was purchased by MYR on behalf of the partnership, and the parties executed a formal partnership deed in relation to this project. A formal partnership deed was also prepared for the next property, at Caulfield South, which was purchased by Mr New, but the deed was never executed. No deed was prepared or executed by the parties for a property purchased at Croydon, which was purchased by the partners as tenants in common.

7 The following developments were undertaken by the New and Furman interests between 1999 and 2009:

(a) 121 Charman Road, Beaumaris: three residential units;

(b) 200 Charman Road, Beaumaris: five residential units;

(c) 24 Poath Road, Hughesdale: five residential units;

(d) 97-101 McDonald Street, Mordialloc: 19 residential units;

(e) 109 High Street, Hastings: one three level commercial building;

(f) 7 Takapuna Street, Caulfield South: three residential units; and

(g) 4 Hewish Road, Croydon: three warehouses.

8 Green & Sternfeld provided the accounting services for each of the projects referred to above. As with the Charman Road projects, an entity controlled by Mr Furman, Furman Constructions Pty Ltd ("Furman Constructions"), provided the construction and project management services for the projects. The responsibility for arranging financing for the projects remained with Mr New. He arranged for LHND to be the borrower under various commercial bill facilities from Westpac Banking Corporation ("Westpac"), secured by mortgages over the properties and guarantees from MYR (except in the case of the Charman Road projects). The amount of the liability to Westpac rose and fell according to the commercial activities of the partnership, increasing to fund construction and other development expenses, and decreasing as the sale proceeds of completed projects were applied to retire debt.

9 While it appears that there may have been some dispute in or around 2004 regarding Mr Furman's profit entitlements pursuant to the Charman Road projects, the relationship between the parties appeared to proceed smoothly until 2009. In 2009, Mr Furman approached Mr New and expressed concern about the accounting of the affairs of the partnership. Then, while the scope of the extent of the investigation is in dispute, Mr Furman's accountants, Lowe Lippman, and Green & Sternfeld engaged in an extensive dialogue over the months between April 2009 and December 2010, when Mr Furman signed the director's declaration in respect of the partnership accounts for the 2008-2009 financial year ("2009 accounts"). However, shortly afterwards, the disputes between the parties escalated.

10 LHND alleges that in January 2011 that there was an agreement between Mr New and Mr Furman to sell the remaining partnership properties and wind up the affairs of the partnership, but that Mr Furman reneged upon this agreement and refused to sell the properties. There were also disputes between the parties regarding the accounting for rental income received from partnership properties by Mr Furman. By mid2011 Mr Furman was once again raising concerns about the validity of the partnership accounts.

11 On 18 March 2011, Mr Lebovits of Green & Sternfeld sent Mr Furman an email enclosing certain documents and requesting certain documents be provided by Mr Furman and Furman Constructions to enable preparation of draft accounts for the 2009-2010 financial year ("2010 accounts"). There was further correspondence between Green & Sternfeld, Lowe Lippman, and Mr Furman regarding preparation of the 2010 accounts over the course of the following months. On 26 May 2011, Mr Furman met with Mr Lebovits, following which Mr Lebovits sent the following email to Mr Furman (copied to Messrs Saltzman and Rathner of Lowe Lippman):

I refer you to our meeting last night wherein certain allegations of doubledipping and appropriation of funds advanced by the bank were again questioned by you. May I remind you that Lowe & Lippmann under the supervision of Gideon Rathner rigorously investigated all the monies that were advanced by the bank and how those funds were appropriated by the Partnership. Your request of me last night was the subject of the long and tedious investigation initiated by you and brought to an amicable conclusion prior to your signingoff on the 2009 Financial Statements.

In our conversation yesterday you indicated your willingness to make an offer on Hastings and that you would be no longer interested in obtaining a unit at Mordialloc in part satisfaction of your loan account. I ask that you put your proposals in writing for Mr New to consider.

Finally, would you please advise me in writing as to why you refused to signoff on the 2010 Financial Statements so that I can refer this matter to Mr New for comment.

12 Further correspondence took place between Green & Sternfeld and Lowe Lippman over the course of the following month. On 19 June 2011, Mr Saltzman of Lowe Lippman wrote to Mr Lebovits, ostensibly in respect of the draft 2010 accounts, but raising the following general concerns and queries regarding the accounting for the partnership as a whole:

(a) how the difference between the bank funding for the Hastings project and the construction costs for the project were accounted for;

(b) where the GST refunds paid to the partnership during the construction phase of the projects were credited to, whether they were correctly treated in the partnership accounts, and why GST refunds had been paid to LHND;

(c) what a "separate cheque book" for the partnership was used for and queries regarding specific payments to LHND;

(d) why the balance of the LHND loan account was so high given that there was also a sizeable debt due to Westpac;

(f) he criticised the manner in which the profits from the Charman Road developments were accounted for by LHND;

(g) he criticised the way in which the partnership accounts were prepared on an "englobo" basis, rather than a projectbyproject basis;

(h) he demanded that action be taken to have Westpac refund overcharged penalty interest to the partnership; and

(i) he asserted that there was a conflict between Green & Sternfeld's role as accountant for the New interests with its role as accountant for the partnership.

13 It was clear by the end of June 2011 that the relationship between Mr Furman and Mr New had deteriorated to the point of no return. On 27 June 2011, Mr Lebovits sent the following email to Mr and Mrs New (later copied to Messrs Saltzman and Rathner):

We wish to advise you that Yvonne and Moshe Furman met with the writer yesterday afternoon, making the following demands, threats and accusations:

1. The profit from the joint venture of Charman Road is to be paid to Moshe & Yvonne Furman immediately (not just represented in their loan accounts).
2. The share of profit from Takapuna/Poath Road. Mr Furman alleges that Mr New has collected all the profits, therefore L & H New Developments needs to give MYR Investments Pty Ltd 50%.
3. There has to be an immediate refund of GST paid into L & H New Developments Pty[L]td account against invoices from Furman Constructions Pty Ltd (Mr Furman alleges that L & H New Developments are not entitled to this GST).
4. Mr Furman alleges that there is a conflict of interest for Green & Sternfeld as they are the accountants for the Partnership, and he is not satisfied with Doug Black's figures.
5. Mr Furman alleges all GST amounts paid to L & H New Developments Pty Ltd must be returned to the Partnership.
6. Mr Furman advised that there are still outstanding building fees with respect to the projects.
7. Mr Furman claims that Mr New has put no monies into the project and that Mr New is a very good juggler (of figures), recycling monies.
8. Mr Furman claims that all the loan accounts in the Financial Statements are incorrect.
9. Mr Furman alleges that Gideon Rathner did not do the investigation properly.
10. Mr Furman alleges that Mr New has no right to write out cheques and emphasized yet again that Mr New recycled all the monies.
11. Mr Furman has taken the Hastings Project in isolation and believes the construction costs, together with the cost of land, to be approximately $1,600,000.00 He is perplexed and cannot understand why $2,230,000.00 was borrowed for this project. (Please note that we have provided an explanation for this and that he has rejected the accuracy of our working papers.)

If the above demands will not be met by L & H New Developments Pty Ltd, Mr & Mrs Furman have threatened to go to the Australian Taxation Office, the Institute of Chartered Accountants and appoint a lawyer to represent them.

14 Further correspondence took place between Green & Sternfeld and Lowe Lippman between June 2011 and September 2011, with no resolution being reached.

15 On 16 September 2011, LHND's solicitors, Hall & Wilcox, sent two letters to Mr Furman. The first letter was in relation to MYR's letting of unsold units at the Mordialloc property, which was alleged to be contrary to an agreement reached at a meeting between Mr New and Mr Furman in January 2011 that the units would be sold. This letter also demanded that MYR account for all of the rental income received by it from the Mordialloc units. The second letter alleged further wrongful conduct on the part of MYR and Furman Constructions, including:

(a) failure to provide information to Green & Sternfeld to enable them to finalise the 2010 accounts;

(b) unreasonably delaying the execution of refinancing documents for the Mordialloc property, resulting in approximately $100,000 in penalty interest being charged to the partnership;

(d) unreasonably delaying the approval of the 2009 accounts; and

(e) the making of various unfounded and false assertions during the meeting between Mr Furman and Mr Lebovits on 27 June 2011, such assertions being repeated and implied in the subsequent correspondence from Lowe Lippman.

16 Such conduct was alleged by LHND to be a breach of MYR's contractual and general law obligations to LHND, and evidenced a breakdown in the relationship of mutual trust and confidence between LHND and MYR. Accordingly, LHND contended that the partnership should be dissolved.

17 Correspondence ensued between Hall & Wilcox and Mills Oakley (MYR's former solicitors) over the remainder of 2011 and into 2012, to no productive end. Further, in 2012, Lowe Lippman in correspondence with Green & Sternfeld commenced reagitating the complaints raised by Mr Furman and Lowe Lippman in 2011 regarding the partnership accounts, again, to no productive end.

18 On 6 April 2012, LHND issued this proceeding, seeking declarations as to the date of dissolution of the partnership, and, by way of a summons dated 13 July 2012, the appointment of a receiver to the partnership. On 17 August 2012, Almond J made orders by consent ("17 August orders") which, among other things:

(a) noted certain undertakings given by the parties regarding the assets, liabilities, revenue and expenses of the parties;

(b) declared that the partnership was dissolved on 26 March 2012;

(c) ordered that the business and affairs of the partnership be wound up;

(d) referred the proceeding to an associate judge to determine a number of preliminary questions;

(e) ordered that upon determination of the preliminary questions an account be taken of the affairs of the partnership from the date of commencement of the partnership;

(f) ordered that upon determination of the accounts, further orders would be made so as to determine the liability of the partners, and the amount, if any, payable upon the taking of accounts and orders for the payment of such amounts; and

(g) dismissed LHND's application for the appointment of a receiver (save that the undertakings given by LHND were made reserving LHND's rights to renew its application to appoint a receiver to the partnership).

19 A number of preliminary hearings were held during the latter part of 2012, during the course of which the list of preliminary questions was settled, and directions given for the hearing of evidence and argument regarding the determination of the first four questions, being:

(a) the date from which the parties carried on the partnership;

(b) the identity of the property developments which were conducted by the parties pursuant to the partnership;

(c) whether the Westpac bill facility in the name of LHND is or ought to be a liability of the partnership and whether the interest expense payable thereon is an expense of the partnership; and

(d) whether MYR is bound by the partnership accounts for the financial years ending 30 June 2003 to 30 June 2009.

20 Directions were made for the filing and service of statements of facts and contentions and affidavit evidence in relation to each of these questions, and the hearing commenced on 20 February 2013. The first two days of the hearing were primarily consumed by the parties' openings and dealing with objections to the admissibility of evidence, and the matter was adjourned for further hearing on 22 April 2013. While the matter stood adjourned, several developments took place. LHND made a successful application to amend its statement of facts and contentions in relation to question (d). MYR opposed the application to amend, but withdrew its appeal against the orders made allowing the proposed amendments, while reserving its rights to re-agitate the matters raised in opposition to those amendments at the final hearing. Also in the intervening period, MYR commissioned a report from Grant Thornton, forensic accountants, regarding what were said to concern substantial errors in the accounting of the partnership ("Grant Thornton report"), which was only filed and served on the eve of the resumed hearing on 22 April 2013.

21 On the resumption of the hearing on 22 April 2013, counsel for MYR apologised for the late delivery of the report, and submitted that, given the cost to his client of commissioning the Grant Thornton report, the significance of the accounting errors identified by the report, and the significance of those errors to the case advanced on behalf of his client, he felt compelled to apply for an adjournment. Given the length and detail of the report, and the necessity for LHND to have sufficient time to respond, acceding to such an application would have necessitated an adjournment of some months, in the context of the hearing having already been adjourned from February 2013, with consent orders having been made seven months previously. A further adjournment was vigorously resisted by counsel for LHND, and he submitted that I should not permit MYR to rely upon the Grant Thornton report.

22 During the course of submissions, I formed the view that the Grant Thornton report was not relevant to the determination of questions (a) and (b). However, it would be relevant to questions (c) and (d) if, based upon the lay evidence and submissions advanced by LHND, I formed the view that MYR was bound by the 2009 accounts. By way of example, if I were to find that, by signing the 2009 Accounts, Mr Furman on behalf of MYR had made a representation as to MYR's belief in the accuracy of the accounts, which LHND had relied upon to its detriment, then the issue of whether there were material errors in the accounts which disadvantaged MYR may well be relevant to the question of whether it would be unconscionable for MYR to be estopped from relying upon its rights as a partner to seek a full accounting of the affairs of the partnership from its inception.

23 Alternatively, if I were to find that the 2009 accounts were an "account stated", MYR would be bound by those accounts, unless it could demonstrate that there was some evidence of fraud, or that there were serious errors in the accounts. Again, the Grant Thornton report may well be relevant to the determination of whether there were serious errors in the accounts. The hearing proceeded on that basis, and there was limited, if any, discussion about the accuracy or otherwise of the 2009 accounts. The Grant Thornton report was not tendered in evidence and I have not read it since my very cursory review when it was first filed.

24 Over the course of time the issues between the parties narrowed somewhat. In relation to questions (a) and (b), the real issue in dispute was whether the Poath Road development was the first project to be conducted by the partnership, or whether this development was conducted prior to the partnership's commencement of the partnership. The answer to this question would determine the partnership's commencement date.

25 In relation to question (c), it was conceded by MYR that the development of the various partnership projects had been financed by the Westpac bill facilities, and, to the extent that the facilities were drawn down and interest paid for the legitimate purposes of the partnership, the outstanding debt and interest expenses should be shown as liabilities and expenses of the partnership. The issue in dispute is whether all of the funds raised by the Westpac bill facilities have been utilised for partnership purposes, and whether there has been "double counting" in favour of LHND: that is, whether the draw downs from the Westpac bill facility have not only been recorded as a liability of the partnership, but have also been recorded as capital contributions by LHND, thus inappropriately inflating the balance of LHND 's loan account within the partnership accounts. The resolution of this issue is inextricably bound up with the determination of question (d): if MYR is found to be bound by the 2009 accounts, then it will be held to be bound by the treatment of the Westpac bill facilities within those accounts.

26 The question of whether MYR is bound by the 2009 accounts, or, more accurately, the amounts of the assets and liabilities of the partnership, including the amounts said to be owing to Westpac, LHND, MYR and Furman Constructions is of material significance to the process of the taking of accounts as contemplated by the 17 August orders. By June 2009, the business activity of the partnership had substantially diminished, in that most of the development projects had been completed and sold, and the remaining partnership properties were few in number and subject to tenancy arrangements. Accordingly, the task of completing the accounts for the 2010, 2011, 2012 and 2013 financial years would be relatively straightforward, if it is accepted that the balance sheet in the 2009 accounts is the proper starting point for the taking of an account. All that would be required is for the asset values to be updated, rental income recorded, offset by bank interest and property management expenses. Much of this work has probably already been done by Green & Sternfeld.

27 On the other hand, if the parties were required to undertake a full reconstruction of the accounts of the partnership, whether from 2002 or 2004, or even earlier, this would potentially be an expensive and time consuming process. An indication of the potential scale of this undertaking can be gleaned from the time taken and costs incurred during the course of the review referred to in paragraph 9 above, being approximately eighteen months in duration and costing $170,000 in accountants' fees.

28 While the correspondence between the accountants and solicitors over recent years and the preliminary questions raise a number of issues, a number of them go to matters of "form", that is, the manner in which various matters have been recorded in the partnership accounts, or concern disputes over sums of money (say, for rentals received from partnership properties) which are relatively small (in the context of the hundreds of thousands of dollars in legal costs which must have been spent by the partners to date during the course of this proceeding). The real commercial issue in dispute between the parties concerns the quantum of the loan balances of the respective partners and their related entities. The final version of the 2009 accounts shows that the partnership had total assets of $5,250,357.14, and liabilities of $5,369,153.93, with the partners having a negative equity in the partnership of $59,398.38 each. The bulk of the partnership's liabilities were made up of borrowings, with $2,230,000 owed to Westpac, $1,974,829.27 to LHND, and a total of $688,194 to Furman Constructions. Accordingly, if the partnership had been wound up as at 30 June 2009, the proceeds of the sale of the partnership assets would have been sufficient to pay out Westpac, trade creditors, and the bulk of the loan accounts, with no profits available for distribution between the partners, and thus, there would be a substantial imbalance between the funds going to LHND and those going to the Furman interests.[2] Given that the practice of Green & Sternfeld in relation to the partnership accounts was to effect adjustments to the partner's entitlements by varying the balances of the loan accounts in the partnership accounts, the commercial focus of the parties, and in particular, Mr Furman, has been the balance of the loan accounts. However, despite some efforts on my part, I have been unable to ascertain the extent to which Mr Furman says LHND's loan account balance is overstated, and Furman Construction's is understated. That is unfortunate, given the fact that this hearing has consumed nine court sitting days, not taking into account the various directions hearings before Almond J. Apart from a somewhat throwaway line during the course of submissions that the Furman interests are owed "millions", Mr Furman's inability, or unwillingness, to provide even an estimate of the amount said to be owing to MYR and/or Furman Constructions over and above the amounts recorded in the 2009 accounts makes it extremely difficult for either the parties or the Court to assess the proportionality of this litigation, that is, to assess whether the amounts at stake are commensurate with the legal costs and court resources which have been devoted to this exercise.

29 The following people gave evidence on behalf of LHND:

(a) Mr Louis New, a director of LHND and the principal of the New interests;

(b) Mr Robert Lebovits, a principal of Green & Sternfeld, the accountants for Mr New's family and companies, and the accountants for the partnership;

(c) Mr Doug Black, an accountant employed by Green & Sternfeld; and

(d) Mr Perry Rosenbaum, a solicitor who was retained by the partnership during 2009 in relation to the subdivision of the Mordialloc property, as well as the subsequent sale of units developed at the Mordialloc property.

30 All of LHND's witnesses, save for Mr Rosenbaum, attended the hearing, and were crossexamined.

31 The following witnesses were called to give evidence on behalf of MYR:

(a) Mr Moshe Furman, the director of MYR and Forman Constructions;

(b) Mr Stephen Moulton, a solicitor, who attended the auction and purchased the Poath Road property on behalf of the New and Furman interests;

(c) Mr Mark Saltzman, a principal of Lowe Lippman, accountants, who has primary conduct of the accounting requirements of the Furman interests;

(d) Mr Gideon Rathner, a principal and insolvency specialist with Lowe Lippman, who, at Mr Saltzman's suggestion, was retained by Mr Furman to review the financial affairs of the partnership over the course of 2009 and 2010; and

(e) Ms Martha Pham, a part-time bookkeeper employed by Mr Furman until 2010.

32 MYR also tendered a further report by Grant Thornton regarding the financial aspects of the Poath Road development. This report merely summarised the available financial information regarding the purchase of the property, the financing of the purchase price and development costs, and the sales proceeds and rental receipts. The report made no conclusions of any real substance. Given that it was not referred to in either party's submissions, I can infer that its contents do not meaningfully assist the parties and the Court in determining:

(a) whether or not Poath Road was a partnership project; or

(b) whether Green & Sternfeld's accounting for the Poath Road project was accurate in substance (rather than in form, given that it had initially been accounted for in the books of LHND).

33 LHND also subpoenaed a file held by Bendigo & Adelaide Bank Ltd ("Bendigo Bank"), which provided financial accommodation to Mr Furman's interests in recent years, and called two bank officers to give evidence regarding certain documents upon the file. These documents and this evidence was primarily, but ultimately tangentially, relevant to the question of whether MYR was bound by the 2009 accounts.

34 Finally, MYR subpoenaed the file of Mr James McCarthy, a solicitor who acted for the LHND and MYR interests for the purchase, subdivision, and sale of the Poath Road property. The documents from his file were tendered without objection, and Mr McCarthy was not required to give oral evidence.

35 The parties agree that the following projects were partnership projects:

(a) 109 High Street, Hastings;

(b) 7 and 7A Takapuna Road, Caulfield South;

(c) 97-103 McDonald Street, Mordialloc; and

(d) 49-53 Hewish Road, Croydon.

36 As indicated above, the only issue in dispute is whether the Poath Road development was a partnership project. MYR accepts that the onus is upon it to establish that the Poath Road development was carried out by the parties in partnership. In its statement of facts and contentions in relation to this question, MYR submitted as follows:

(a) between 1999 and 2001 the principals of the parties, Mr Louis New and Mr Moshe Furman conducted two joint venture projects developing properties owned by entities associated with Mr New in Charman Road, Beaumaris;

(b) in 2001 Mr New and Mr Furman verbally agreed to change the structure of their business dealings to become a partnership in equal shares, in order to provide for the longevity of their business relationship, and to facilitate the entry of Mr New's son into the property development business;

(c) Mr New and Mr Furman agreed that the profits from Charman Road joint ventures would be used as an initial capital contribution to the partnership;

(d) in February 2002, Mr New incorporated LHND to represent the New interests in the partnership, and at around the same time, Mr Furman nominated MYR to represent the Furman interests in the partnership;

(e) in February 2002, the partnership purchased the Poath Road property, which after settlement of the purchase in August 2002, was registered in the names of the parties as tenantsincommon;

(f) the purchase of the Poath Road property was financed in part by loan funds secured by LHND, which was secured by a mortgage over the Poath Road property, and supported by a limited guarantee by MYR, and in part from the profits of the Charman Road projects;

(g) subsequently, five townhouses were developed on the site, which were progressively sold by the partnership between 2005 and 2008; and

(h) some expenses for the Poath Road development were paid for from the partnership bank accounts, and rents received from unsold units were paid into the partnership bank account.

(a) LHND and MYR entered into a partnership in or after November 2003, initially for the purpose of jointly undertaking the acquisition, development and sale of the Hastings property, and with a view to acquiring and developing further properties;

(b) the Poath Road property was developed and accounted for as a separate joint venture between the parties;

(c) the partnership's application for an Australian Business Number ("ABN") identified the date of the commencement of the partnership as 19 February 2004, which was also the date of the purchase of the Hastings property, and was approximately 20 months after the acquisition of the Poath Road property;

(d) the partnership's ABN was registered on 19 February 2004, the partnership was registered for GST on 1 April 2004, and the partnership was issued with a tax file number on 29 April 2004;

(e) the Poath Road development was separately accounted for in the books of LHND, and LHND's balance sheet as at 30 June 2003 reflected:

(i) 'works in progress' in the sum of $789,454.04, correlating with the value of the Poath Road development at that time; and

(ii) nil 'equity in partnership';

(f) Mr Furman signed the 2009 accounts, which did not include the Poath Road development within the scope of the partnership;

(g) in relation to the entries in the partnership journals for the financial year ending 30 June 2006, which were relied upon by MYR to support its contention that the Poath Road development was a partnership project, LHND stated:

(i) the inclusion of some 'development costs' in the sum of $14,567.27 in respect of the Poath Road development was made in error, and was corrected by the inclusion of a $14,568.10 'gross loss' as reflecting the 'Closing Works In Progress' in the financial statements, the effect of which was to share the loss on an equal basis as between LHND and MYR;

(ii) the receipt of some rents in respect of the Poath Road development was a result of rents being incorrectly paid into the partnership bank account at the direction of MYR, resulting in those rents being recorded in the partnership's cash receipts journal, and was corrected by treating those rents as an asset of the partnership in the financial statements, the effect of which was that the rental income was accounted for equally as between LHND and MYR; and

(iii) no development costs in respect of the Poath Road development were included in the financial statements or ledgers of the partnership for any other financial year.

38 MYR accepts that the Poath Road development was accounted for in the books of LHND in the same manner as the Charman Road projects. However, MYR submitted it was apparent from the evidence that the reason why Green & Sternfeld accounted for the project in this way was because Mr Black of Green & Sternfeld mistakenly believed that LHND was the sole purchaser of the Poath Road property by reason of him having been given a document headed "Statement of Adjustments" which mistakenly referred to LHND as being the sole purchaser.[3] Rather, the evidence of Mr Furman regarding his conversation with Mr New, the purchase of Poath Road in the names of both parties as tenantsincommon, and the provision by MYR of guarantees for the financing of the project all pointed to a conclusion that the Poath Road development was conducted in partnership.

39 The applicable legal principles governing the determination of whether two or more persons carrying on business together are doing so in partnership or pursuant to some other relationship are concisely and accurately summarised in the written submissions prepared by MYR, as follows (omitting footnotes):

(a) section 5 of the Partnership Act 1958 (Vic) defines "partnership" as "the relation which subsists between persons carrying on a business in common with a view of profit";

(b) the burden of proving the existence of a partnership lies with the party alleging its existence;

(c) a partnership is a contractual relationship the existence of which is determined according to what the parties are considered (objectively) to have intended, and their conduct towards one another during the course of a business;

(d) the question of whether a partnership exists is a mixed question of fact and law. The court must look at all the circumstances in making its determination. If the partnership agreement is not in writing, there must be substantial evidence of the activities of the partners and how they reflect an agreement to form a partnership;

(e) evidence of conduct following the asserted commencement date is also admissible on the question of whether a contract subsisted from that date;

(f) there are some classic indicia of partnership behaviour. These include:

(i) carrying on of a business;

(ii) acquiring property as co-owners (if the assets are part of the business that the parties are carrying on in common);

(iii) sharing of profits and losses; and

(iv) requiring approval of other partners to transfer interests in the partnership;

(h) these stand in contrast to the classic indicia of a joint venture, which include:

(i) the provision of capital by one party alone;

(ii) the provision of other services by another party alone; and

(iii) different methods of calculation of return on investment for different parties; and

(i) a business will be regarded as carried on "in common" if "it is operated either by or on behalf of all persons who are alleged to be partners". There is no rule that a partnership will not exist prior to the commencement of a business. The critical point, at least with respect to conduct preparatory to the trading of the business, is whether the activity is carried out with a view of profit.

40 In my view, MYR has established that the Poath Road property was purchased and developed pursuant to a partnership between LHND and MYR. There is, of course, evidence that points to a contrary conclusion, in particular, registration of the partnership with the ATO in 2004, well after the purchase of the Poath Road property, the treatment of the Poath Road development in the accounts of LHND and MYR, and the failure of Mr Furman to object to the accounting treatment of Poath Road over time, including during the period in 2009 and 2010 when Lowe Lippman were reviewing the affairs of the partnership. However, the preponderance of the evidence supports a conclusion that, after the completion of the Charman Road developments, the parties agreed to form a partnership for the purpose of purchasing, redeveloping and selling properties, and that the treatment of the Poath Road development in the accounts of the respective parties was a mistake on the part of Green & Sternfeld. The reason why none of the parties or their representatives queried or protested the accounting treatment of the Poath Road development was because Green & Sternfeld's adjustment of the partnership accounts to reflect each party's entitlement to the profits made on the Poath Road project meant that neither party was financially advantaged or disadvantaged by the lack of recognition of Poath Road as a partnership property. It is significant that the question of whether Poath Road was a partnership property or not assumed no significance until 2012, when MYR referred to Poath Road being a partnership property in its defence and counterclaim filed on 10 May 2012. Indeed, throughout the course of the parties' business relationship Mr Furman expressed, from time to time, much more concern about accounting for the profits from the Charman Road developments than about his entitlements from the Poath Road developments.

41 Returning to the question of whether a partnership was formed at the time of or prior to the purchase of the Poath Road property, I note that most of the evidence about this matter was not particularly controversial: the dispute between the parties is really about what conclusions can be drawn from the evidence. Also, while I have some serious reservations regarding the credibility of some of Mr Furman's evidence, the evidence he gave regarding his conversation with Mr New regarding the establishment of the partnership was not seriously disputed or undermined.

42 In his affidavit sworn on 25 January 2013, Mr Furman deposed as follows:

Once the first Charman Road sales were made, in approximately late 2001 or early 2002 I asked Mr New what was going to happen from this point forward. Mr New said that he wanted to establish an ongoing property development business with me. In this context, Mr New said that he wanted to establish an ongoing property development business into which, in time, he could bring his son, Chesky (also known as Harry), who was a lawyer working at a city law firm. He said that in order to provide longevity, he wanted to create a partnership so that there was a substantial business that Chesky could eventually join, which would enable him to leave the law. I said to Mr New that I had no problem with this, and agreed to establish a partnership with him.

Mr New and I went on to discuss financing developments of the partnership, and agreed that we would use profits made on the Charman Road developments as working capital to help finance the acquisition of properties. For this reason, I did not insist on a distribution from the Charman Road sales, despite the terms of the JV agreements.

From this time onwards, Mr New and I talked in terms of being "partners" and "in partnership". Mr New would say to me from time to time that "it is very important to have trust in a partnership", with which I agreed.

Mr New and I did not have a deed drawn up to reflect our arrangements, unlike the Charman Road developments. This did not concern me, as we had got along well during the Charman Road developments, and I had previously been in partnership with people whom I trusted without drawing up a partnership deed. I agreed with Mr New that his accountants would deal with the details and accounting of the partnership.

43 In response, Mr New in his affidavit of 18 February 2013 deposed as follows:

.... I recall that in around late 2001 or early 2002 I had a conversation with Mr Furman during which I said to Mr Furman that I wanted to continue undertaking property developments with him, and that I was looking to bring my son, Harry, into that business at some time in the future.

.... I have spoken with Mr Furman at various times in terms of us being "partners" and "in partnership". I do not recall at any time speaking with Mr Furman in terms of being "partners" or "in partnership" with him in relation to the Poath Road development."

44 Further, at paragraph 39 of his 25 January 2013 affidavit, Mr Furman deposed as follows:

Shortly after my conversation with Mr New in late 2001/early 2002 regarding the partnership ... I found a potential development site at 24 Poath Road, Hughesdale. I recommended to Mr New that we acquire it and told him the details of the auction. Mr New agreed to the purchase, but requested that we not bid on the property in person because the auction was on a Saturday. Mr New's objection to our attendance at the auction was based on the fact that the auction was to occur on the Sabbath, and religious Jews are not supposed to conduct business on this day, and even if I bought it as his partner, he considered that it would reflect poorly on him.

As a result of Mr New's request, I gave instructions to Mr Stephen Moulton, a lawyer of my acquaintance, who had expertise with religious Jewish clients.

Prior to the auction in February 2002 at which the Poath Road property was purchased I had a conversation with Mr Furman during which we discussed that Mr Moulton would purchase the Poath Road property as nominee for [LHND].

46 In his reply affidavit, Mr Furman denied that he had agreed that Mr Moulton would purchase the property as nominee for LHND alone.

47 In his affidavit sworn on 8 April 2013, Mr Moulton gave evidence that he believed he was purchasing the property on behalf of both the New interests and the Furman interests. He confirmed this evidence in the course of his crossexamination at trial.[4]

48 In his affidavit of 25 January 2013, Mr Furman deposed at some length as to the tasks he undertook with respect to the development and management of the Poath Road projects, including hiring architects and land surveyors, attending at VCAT to deal with planning objections, arranging for the subdivision of the land, and engaging a real estate agent to let out the properties while they remained unsold. While this uncontested evidence is not conclusive of the matter, it is consistent with MYR being an active partner in the business, rather than Mr Furman being just the builder.

49 Both Mr New and Mr Furman were somewhat vague in their evidence under crossexamination regarding the events of 2002. The most that could be gleaned from Mr New's evidence at trial is as follows:

(a) he originally believed that LHND purchased the Poath Road site in its own right,[5] but he accepted that he signed various documents produced from the McCarthy file which showed both LHND and MYR as purchasing the land as tenants in common;[6]

(b) while he said that LHND was incorporated for the purpose of conducting property developments generally, he agreed that LHND did not embark upon any projects other than those conducted with MYR;[7] and

(c) he believed that the profits from the Poath Road development were reinvested in the Hastings project.[8]

50 The effect of Mr Furman's oral evidence was that he instructed both Mr Moulton and McCarthy's solicitors to act on behalf of his interests and Mr New's interests in purchasing Poath Road.[9] He nominated MYR as the purchaser on the advice of his accountants.[10] He had no knowledge of whether accounts were prepared for MYR and whether the Poath Road project was accounted for in the accounts of MYR.[11] He agreed that MYR made no contribution to the purchase price of Poath Road.[12]

51 Messrs Lebovits and Black from Green & Sternfeld and Messrs Saltzman and Rathner from Lowe Lippman gave some evidence regarding the accounting for Poath Road. Mr Black gave evidence that at some time between December 2001 and January 2002 he was instructed by Mr New to set up a special purpose vehicle for the purpose of engaging in property development with Mr Furman.[13] The only document he reviewed regarding the purchase of the Poath Road property was the Statement of Adjustments which led him to erroneously conclude that LHND was to be the sole proprietor of the land at Poath Road.[14] He never produced any separate accounts for the Poath Road joint venture.[15]

52 Mr Lebovits conceded under crossexamination that his conclusion that the Poath Road development was conducted as a joint venture was at least in part based upon his assumption that Poath Road was purchased by LHND alone.[16]

53 LHND relied upon a letter from Mr Saltzman to Mr Black dated 11 August 2003 ("2003 letter")[17] to support its conclusions that the Poath Road development was conducted as a joint venture. The text of the 2003 letter is reproduced below:

Dear Doug

RE: FURMAN AND NEW JOINT VENTURES

As previously discussed with Pam Dickson, your client Mr Louis New has entered into a new joint venture (JV) with our client, Mr Moshe Furman, for the development of the property at 24 Poath Road Hughesdale.

You advised that Mr Furman was conducting this enterprise through MYR Investments Pty Ltd and that, unless you were advised otherwise, you would treat this JV arrangement for tax purposes in the same manner that you had treated the previous arrangements - that is, to treat the purchase and sale of the property as that of Mr New for the purposes of the Goods & Services Tax (GST), and for Mr Furman to separately report for the construction costs under his GST registration. You then calculate the profit on the sale on the basis of the information you have, together with that provided by Mr Furman of the relevant construction costs. The profit is then brought to account on a 50/50 basis by Mr New and Mr Furman.

In previous JV arrangements, the property purchase has been registered in the name of Mr New or one of his entities. To date, we have not seen any documentation to indicate whether this is the same with the Poath Road development. Assuming it is, the only apparent entitlement that the Furman group would have to any proceeds from the sale of the property would be on the basis of some service or other supply that it had made to the registered owner. Moshe would therefore be required to pay GST on the "profit share" he receives. To maintain equity between them, Mr New would need to pay an additional amount to Moshe to cover the GST, which he would then claim back again (and for which a tax invoice would need to be issued).

We are not sure whether or not this has been the procedure in the past. If it has, then there is a proper final matching of GST paid and input tax credits in each of Mr New and Mr Furman's groups. If it has not, even though the correct amount of GST has been paid between the two entities over the life of the development project, our client is at risk of a GST audit on two bases:

• input tax credits have been claimed for expenses incurred in the project, but there is no corresponding GST liability in the entity claiming the credits - this may be assessed as a risk by the ATO.
• the "profit share" may be assessed as income from carrying on an enterprise on which GST should have been paid.

It is therefore our preference for the JV to be registered as a partnership for GST purposes, and for all of the GST transactions to be brought to account through this entity.

We would be pleased to discuss this matter with you further, at your earliest convenience.

54 Despite the final paragraph of the letter, the evidence suggests that Mr Black did not reply to this letter, no action was ever taken in response to Mr Saltzman's proposal, and Mr Saltzman's proposal was not discussed with either of Mr Furman or Mr New.

55 Mr Saltzman in his evidence confirmed that the MYR accounts prepared in 2003 and 2004 did not show any interest in any partnership involving the Poath Road development.[18] He knew at least by 2009, that the Poath Road development had been accounted for in the accounts of LHND.[19] He accepted that the invoice prepared by him and rendered by Furman Constructions Pty Ltd dated 31 July 2006 in respect of construction and management services for Poath Road[20] had been addressed to LHND alone.[21] He gave evidence that he did not discuss the contents of the 2003 letter with either Mr Black or Mr Furman.[22]

56 Mr Rathner did give some evidence regarding the Poath Road development, but apart from him acknowledging that the Poath Road project, along with the Charman Road projects, were identified separately from the agreed partnership projects in some documents he reviewed and during the course of a meeting with Messrs Lebovits and Black on 11 March 2013,[23] his evidence was more relevant to the accuracy of the accounting for the Poath Road development rather than the legal characterisation of the relationship between the parties.

57 There were a number of significant differences between the manner in which the parties conducted the Charman Road developments, and the Poath Road development, which supports a conclusion that the Poath Road project was conducted by the parties in partnership. First, Mr New incorporated a special purpose vehicle to represent his interests in his commercial undertakings with Mr Furman prior to the purchase of the Poath Road property. Secondly, the property was purchased by both parties as tenants in common. Thirdly, Mr New and Mr Furman discussed the financing of the properties, and, while LHND was the primary borrower, MYR provided a guarantee for the full amount of the facility, which did not occur in the case of the Charman Road developments. The solicitors engaged to conduct the sales of the properties and the real estate agents involved in selling and letting the properties were engaged by both parties, as evidenced by the correspondence. Fourthly, the partnership bank account was opened on 19 May 2005, shortly before the parties sold the first lot of the now developed and subdivided Poath Road property, but after the purchase by the partnership of the properties at Hastings, Caulfield South, Mordialloc, and Croydon.

58 The lack of a written partnership deed for the Poath Road development and the accounting treatment of the Poath Road development does not significantly detract from a conclusion that the Poath Road development was conducted in partnership. In relation to the lack of a written partnership agreement, it could equally be said that the absence of a written joint venture agreement was significant, as both of the Charman Road developments were conducted pursuant to written joint venture agreements. Further, the only admitted partnership properties for which formal partnership agreements were prepared (only one of which appears to be executed) were for the properties at Mordialloc (of which MYR was the sole registered proprietor) and Caulfield South (where Mr New was the sole registered proprietor). The remaining admitted partnership properties (Hastings and Croydon) were purchased by the parties as tenants in common, and the arrangements with respect to those properties were undocumented (as was the case with the Poath Road property). This indicates that the parties only felt the need to document their agreement in circumstances where the legal title to the relevant property was vested in only one of the parties to the joint venture or partnership, such that it would be desirable to reflect the other party's equitable interest in the relevant property.

59 As for the accounting treatment of the Poath Road development, it is apparent that Green & Sternfeld, quite reasonably, thought that the Poath Road development was a joint venture between the parties. After all, the Statement of Adjustments provided to them erroneously showed LHND as the sole purchaser of the property, as was the case with the Charman Road properties. The evidence regarding what Mr New told Mr Lebovits regarding the commencement of the partnership is a little unclear, but it is apparent from the affidavit of Mr Lebovits affirmed on 7 December 2012 that not long before of the incorporation of LHND that Mr New and Mr Lebovits discussed Mr New and Mr Furman having an ongoing commercial relationship for the purpose of undertaking property developments.

60 I agree with counsel for MYR that the 2003 letter does not conclusively demonstrate that the Poath Road development was conducted as a joint venture. The letter merely demonstrates that Mr Black had not received any instructions that the Poath Road development was to be conducted as a partnership, and that unless he was instructed otherwise, he would treat the project for GST purposes in the same manner as he had treated the Charman Road projects. In the letter, Mr Saltzman pointed out some potential difficulties for Mr Furman's entities of that approach: not a financial disadvantage as such, but the potential for the arrangement to attract the interest of the ATO. The letter recommended that the joint venture be registered as a partnership for tax purposes, and for all GST transactions to be brought to account through this entity.

61 There is no evidence that either Mr Black or Mr Saltzman sought or received any instructions from their clients in relation to this issue, and it appears that the matter fell by the wayside, at least until the following year, when the partnership was registered. In the end, in the absence of any evidence of any instructions regarding the matter, the accountants' opinions regarding the legal relationship between the parties is only of tangential relevance. The accounting treatment of the Poath Road property simply reflects a reasonable misunderstanding by Green & Sternfeld of the ownership of the Poath Road property.

62 A review of the documentary evidence provides some further support for MYR's contentions that Poath Road was a partnership project. The Lowe Lippman correspondence file[24] includes a file note which records an internal meeting between Mr Saltzman and two others on 16 January 2004, which includes the following notes:

• Poath Road: just started → not a JV, just a p/ship

• Builder/Furman Constructions Trust → use this entity for claiming/paying GST for the p/ship

63 While this note does not provide conclusive evidence identifying Poath Road as a partnership project, it is consistent with the evidence of Mr Furman and the other indicia of partnership, and its contemporaneous nature has considerable probative value. Presumably, the discussion would only have taken place if Mr Saltzman or one of his staff had received express instructions from Mr Furman to that effect, and this was not a period when there was any conflict, or apparent positioning for advantage between the parties, such that there was any reason for Mr Furman to misrepresent the true position to his financial advisors.

64 Mr Saltzman's understanding that the Poath Road project was a partnership project is also reflected in a letter sent by him to Mr Furman on 21 July 2006,[25] enclosing a draft tax invoice for project management fees (including labour and materials and GST) for $1,100,000. While he refers to the invoice being drawn "in favour" of LHND, and queries whether the agreement between Furman Constructions and LHND was oral or written, the draft invoice originally prepared by him shows that it was addressed to both LHND and MYR. Finally, the invoice prepared by Ms Pham on behalf of Furman Constructions for $224,180.00 dated 30 June 2008[26] which is described as being in respect of management construction fees, but is most likely referable to the profit share on the Poath Road project, was addressed to both LHND and MYR.

65 One question arises: if Poath Road was really a partnership property, and therefore the partnership accounts were incorrect insofar as they did not recognise Poath Road as an asset of the partnership, then why was this issue not raised by Mr Furman, Mr Saltzman or Mr Rathner on his behalf prior to 2012? In my view, the answer to that question is that the characterisation of the commercial relationship between the parties in relation to the Poath Road development was not of any particular concern to Mr Furman and his advisors, provided that Green & Sternfeld could demonstrate that Mr Furman's entitlements to the profits of the Poath Road development were either paid out to him or were otherwise recognised as a capital contribution by him to the partnership. Without any disrespect intended to Mr Furman, it is apparent from the correspondence between the parties and their advisors that Mr Furman is primarily concerned with ensuring he and his entities receive what they are entitled to receive, and to maximise those entitlements, regardless of how the entitlements are characterised in an accounting sense. In my view, the question of the classification of the Poath Road development has only been agitated in the context of the wider dispute between Mr New and Mr Furman, where it is very much in the interests of Mr Furman to criticise Green & Sternfeld's accounting for the affairs of the parties, and the validity of the 2009 accounts in particular.

66 Similarly (and again with no disrespect to those concerned), apart from the 2003 letter, the parties' advisers were clearly not terribly concerned about the legal characterisation of the parties' relationship with respect to the Poath Road project. Apart from the 2004 file note referred to above, there is no evidence that they received or sought instructions from their respective clients about the status of the relationship, and, in the absence of any dispute between the parties regarding their respective financial entitlements with respect to the Poath Road project, there was no pressing need, if any, to do so.

67 When Mr Rathner of Lowe Lippman conducted his review of the partnership's financial affairs in 2009 and 2010, he reviewed all of the projects undertaken by Mr New's and Mr Furman's entities in joint enterprise, including the Charman Road projects and the Poath Road projects. As a result, adjustments were made to the partnership accounts both in Mr Furman's favour in the case of the Charman Road projects and in respect of unpaid construction costs, and adversely in the case of the Poath Road project, where it was agreed that the builder, Furman Constructions, had been overpaid. Again, the legal characterisation of the relationship was not of particular, if any, concern to Mr Rathner.

68 In the written opening submissions filed and served on behalf of MYR, MYR contended that:

MYR was significantly disadvantaged by this accounting treatment because:

(a) there is no recording of any interest of MYR in Poath Road in the 2003 and 2004 accounts of LHND;

(b) the asset ... is treated entirely as an asset of LHND and there is no recognition of any impairment to record Furman interests, however those interests might have been described.

...

The result of these, and other, accounting errors is the creation of Partnership accounts do (sic) not correctly record the Partner's equity and loan account positions. The whole of the subsequent accounts are based upon this flawed beginning.

69 MYR relies upon the evidence of Mr Saltzman to support its criticism of the accounting treatment of Poath Road. In his affidavit sworn on 30 January 2013, Mr Saltzman rejects Mr Lebovits' contention that there was no disadvantage to MYR by accounting for the Poath Road project in LHND's books of account, and stated:[27]

... it was entirely to the disadvantage of MYR for the following reasons:

(a) there is no recording of any interest of MYR in Poath Road in the 2003 and 2004 accounts of LHND;

(b) the asset (Poath Road) is treated entirely as being an asset of LHND and there is no recognition of any impairment to record Furman interests, however those interests might have been described;

(c) the 2004 balance sheet of LHND refers to a liability to MYR in the amount of $206,473 and I note that this amount corresponds exactly to the Furman interests, however those interests might have been described;

(c) The 2004 balance sheet of LHND refers to a liability of MYR in the amount of $206,473, and I note that this amount corresponds exactly to the Furman interests' disputed profit entitlement arising from the 200 Charman Road project, as calculated by Doug Black in his schedule ...

(d) It remains unexplained why the profit share entitlement of Furman Constructions came to be treated as an entity in the accounts of LHND so as to create a liability owed by LHND to MYR, whilst there was a failure to bring into the books of the Partnership that amount as an original capital contribution by MYR, notwithstanding that it seems to be conceded that the joint venture participants profit share would be so applied.

Ultimately, there has been a failure to properly account for the Charman Road projects and the Poath Road profit share and instead:

(a) a loan account has been created in the name of Furman Constructions; and

(b) the LHND loan account has been reduced by the corresponding amount.

I recognise that the calculation of these amounts, in particular, the Charman Road and Poath Road profit shares, are disputed by Mr Furman, but it is the incorrect accounting treatment which, even allowing for the figures, creates a Partnership account which is not a true reflection of the Partners' equity and loan account position.

70 With respect, none of the evidence advanced on behalf of MYR supports the proposition that the manner in which the Green & Sternfeld accounted for the parties' respective entitlements in respect of the Charman Road and Poath Road projects led to any entity controlled by Mr Furman being materially, or at all, financially disadvantaged by the accounting treatment of the Poath Road development. The fact that MYR's joint ownership of the Poath Road property was not recognised in the accounts of LHND is neither here nor there. The Poath Road property has been developed and the units sold, the Westpac bill facility has been paid out, and the profits have been shared equally. MYR was registered on the title of the Poath Road property, and joint ownership of Poath Road has never been a matter of either consequence or dispute. In terms of the parties' entitlements to profits, apart from unsubstantiated assertions by Mr Furman, the best evidence is that:

(a) the dispute between Mr Furman and Mr New regarding the Charman Road projects was compromised by the addition of $40,000 to the balance of MYR's loan accounts in the 2009 accounts, with a correspondent reduction to LHND's loan account balance, as evidenced by an email from Mr Lebovits to Mr Rathner dated 1 November 2010 and the revised version of the 2009 accounts;

(b) Green & Sternfeld provided an accounting for the Poath Road development in a handwritten schedule prepared by Green & Sternfeld on 30 June 2008 recording the net sales, other income, costs, and profits associated with the Poath Road development.[28] A copy of this document was faxed by Lowe Lippman to Green & Sternfeld on 8 August 2008 with the notation "agreed by MF". Mr Furman gave evidence that this was not his handwriting, and that he never agreed with these calculations. Mr Lebovits gave evidence it was not his handwriting.[29] Mr Rathner believes that it might be his handwriting, but this is unlikely, given the date of the document. Some weeks later, Green & Sternfeld received a tax invoice from Furman Constructions claiming the amount of the profit share plus GST; and

(c) in correspondence between Mr Lebovits and Mr Rathner during the course of Mr Rathner's investigations in 2009 and 2010 Mr Lebovits explained the calculations and accounting treatment undertaken by Green & Sternfeld with respect to the Charman Road and Poath Road developments, Mr Lebovits explained to Mr Rathner[30] that these profits were accounted for in the books of LHND as a liability to Furman Constructions. In his letter of 4 May 2009, Mr Lebovits stated as follows:

All profits made by Furman Constructions Pty Ltd in respect of Charman Road and Poath Road have been summarised and forwarded to your office. The amount owed to Furman Constructions Pty Ltd is reflected as a loan account in the books of L & H New Developments Pty Ltd. If you prefer we could reflect this loan in the partnership accounts.

71 As Mr Lebovits received no response to this letter, he prepared a draft of the 2009 accounts reflecting this proposal, which involved

(a) extinguishing this loan balance (which reflected the profit share referable to the Charman Road projects and the Poath Road projects of $430,653.00) in the LHND accounts;

(b) disclosing this loan balance in the partnership's accounts as a loan owing by the partners to Furman Constructions; and

(c) reducing the balance of LHND's loan account in the partnership's accounts by the same amount ($430,653.00).

72 This was confirmed by Mr Lebovits in his letter to Mr Saltzman dated 24 August 2009, where he enclosed, among other things:

A full historical record of Loan Accounts made by L & H New Developments to the Partnership. Please note that monies owed to Furman Constructions Pty Ltd in respect of profits earned on the Poath Road and Charman Road projects have now been recorded in the books of the Partnership.

73 On 13 October 2009, Mr Rathner, in the course of his review of the partnership's financial affairs, wrote to Mr Lebovits requesting, among other things:

that you detail the date and the amount of the payment of the profits arising from the following three projects.

- 121 Charman Road

- 198-200 Charman Road

- Poath Road

Mr Furman has been unable to recollect to identify (sic) receipt of the profit distributions of these projects.

74 On 5 November 2009, Mr Lebovits replied as follows:

1. With respect to 121 Charman Road, Mr M Furman received $80,000 on the 21st February, 2002 as full payment of his share of profit. Mr M Furman has personally acknowledged receipt of this amount.
2. With respect to 200 Charman Road, Mr M Furman was entitled to a profit of $206,473 which was agreed to by him and confirmed by Lowe Lippmann in May 2003. This amount was initially recorded as a Sundry Creditor in the books of Ovid Nominees Pty Ltd (The New Family Trust) and subsequently transferred to L & H New Developments Pty Ltd and represented as a Loan Account owing to Myr Investments Pty Ltd. The profit was used to assist in the finance of the Poath Road project.
3. With respect to Poath Road, Mr M Furman agreed to his share of profit being $203,800 plus GST. An invoice no. 75 was raised by Furman Constructions Pty Ltd to reflect this profit. The amount of $224,180 was recorded as a loan to MYR Investments Pty Ltd in the books of L & H New Developments Pty Ltd. The total amount of $430,653 to MYR Investments Pty Ltd was as at 30th June, 2009 transferred from the books of L & H New Developments Pty Ltd to the books of the partnership.

75 There was further correspondence between Mr Rathner and Mr Lebovits regarding the accounting for the Poath Road development in 2010. Mr Lebovits and Mr Rathner's correspondence in respect of Mr Rathner's review of the financial affairs of the partnership made reference to the Poath Road project on 25 January 2009, 18 February 2010, 19 February 2010, 11 March 2010, 13 April 2010, 3 May 2010, 4 June 2010, 12 July 2010, 30 July 2010, 20 August 2010, and 26 August 2010. Information was exchanged regarding the construction costs, interest charges, other project expenses, the net profits, and the payments to Furman Constructions associated with the Poath Road project.

76 On 4 June 2010, Mr Rathner, in a letter to Mr Lebovits, referred to profit and loss schedules provided to him on 3 May 2010, and queried two items, being an interest charge of $36,842 and another payment of $23,000. It is apparent from emails sent from Mr Rathner to Mr Lebovits on 23 August 2010 and 26 August 2010 that the parties had agreed that Furman Constructions had been overpaid $53,403 in respect of construction costs, which was to be set-off against amounts said by Furman Constructions to be under-payments in respect of other partnership projects. A file note of Mr Rathner's dated 2 September 2010 records a telephone conversation between him and Mr Lebovtiz. The file note records:

Agree Poath, Hastings, Hewish - as per email 26/8.

77 I have not been able to locate any further express reference to the Poath Road project in the correspondence between Mr Rathner and Mr Lebovits. However, to the extent that it is relevant, there was further discussion regarding the accounting for the Charman Road project. Ultimately, an adjustment was made to the 2009 accounts reflecting an agreement reached during a telephone conversation between Mr Rathner and Mr Lebovits on 27 October 2010. In regard to the latter, Mr Lebovits deposed as follows:

During this conversation, Mr Rathner said to me words to the effect that Mr Furman would agree to the profit related loan balance disclosed as owing to [Furman Constructions] in the second draft of the 2009 accounts provided there was an adjusted increase of $40,000 made to that balance to reflect additional amounts Mr Furman claimed were owing to [Furman Constructions] in relation to the Charman Road development.

78 The loan account balances of both Furman Constructions and LHND in the final 2009 accounts reflected these adjustments.

79 MYR's evidence in support of its contention that the accounting for the Poath Road project disadvantaged MYR was, at best, equivocal. I have already commented upon Mr Saltzman's evidence. In his affidavit sworn on 17 April 2013, Mr Furman deposed, in summary:

(a) the notation on the Poath Road schedule dated 30 June 2008, (with a fax heading showing that it had been transmitted by Green & Sternfeld on 8 August 2008) "Agreed by MF" was not his handwriting, and he never agreed with those calculations;

(b) the invoice by Furman Constructions for the profit share for the Poath Road project requested by Mr Black in 2008 was not prepared by him. He deposed that Ms Pham did approach him at around that time and requested that he raise an invoice of this amount, but he did not understand what it was for, and Ms Pham did not state to what the invoice specifically related; and

(c) he disagrees with Green & Sternfeld's accounting treatment of the profits of the Charman Road developments. Green & Sternfeld recorded $206,473.00 in the books of LHND as a loan to MYR. Mr Furman deposed:

I was not aware of this transaction and accounting, and was not asked for my consent to the transaction. I do not now, and have never, agreed that this figure accurately represents my share of the Charman Road profits. My agreement, following discussion with Mr New, was that the Charman Road profits were to be contributed as working capital and not represented as a liability owing to my interests.

80 Taking the last of the above matters first, the above statement by Mr Furman is somewhat disingenuous. There was no suggestion that Green & Sternfeld were required, at least as at 2004, to seek Mr Furman's consent as to how they accounted for the various matters, or any indication that they ever did. Further, it is difficult to see how there was any material detriment to Mr Furman's interests in having his entities entitlements recorded as a liability of LHND rather than as a capital contribution by MYR to the partnership. If Mr Furman still seriously disputes whether his entities received the profits from the Charman Road developments, that is a matter for a claim by Furman Constructions under the two joint venture agreements (although there may be limitations issues associated with any claim) but it is not a matter which warrants the reconstruction of the partnership accounts. No party has ever contended that the Charman Road projects were conducted as part of the partnership. In any event, Mr Furman's claim that Furman Constructions had not received its full profit entitlements in relation the Charman Road developments was compromised in the course of Mr Rathner's review of the partnership's financial affairs in 2009 and 2010.

81 In relation to the question of whether Mr Furman authorised the issue of the invoice for the partnership profits on the Poath Road project it is apparent from the coincidence of the figures in the invoice with the handwritten schedule annotated with "Agreed by MF" referred to at paragraph 79(a) above that the sum of $224,180 was recorded as being owing to the Furman interests as a half share of the profits made on the Poath Road development, and that someone apart from Mr Lebovits had annotated the schedule to signify Mr Furman's acknowledgment of the accuracy of that amount.

82 Accordingly, while I am satisfied on the balance of probabilities that the Poath Road project was conducted as a partnership project, I am not satisfied that MYR suffered any material detriment by reason of Green & Sternfeld's accounting treatment of the Poath Road development. Accordingly, I do not agree that my findings regarding the legal characterisation of the parties' relationship with respect to the Poath Road project should, of itself, cause the partnership accounts to be reopened should I find that MYR is otherwise bound by the 2009 accounts.

83 In its amended statement of facts and contentions filed on 15 March 2013 and its written submissions, LHND contended that MYR is bound by the partnership accounts for the financial years ending 30 June 2004 to 30 June 2009, on the basis that:

(a) MYR agreed to be bound by the statement of assets and liabilities and profit and loss statement contained in those accounts and the methodology contained therein as evidenced by the correspondence between Mr Lebovits and Mr Rathner between August 2010 and December 2010;

(b) alternatively, MYR represented and warranted to LHND that the accounts presented fairly the partners' financial position as at 30 June 2009;

(c) LHND provided valuable consideration for the warranty given in that it:

(i) caused the partnership to lodge a tax return for the period ending 30 June 2009 based upon the agreed income statement;

(ii) entered into a further business finance agreement on behalf of the partnership with Westpac dated 11 August 2011;

(iii) signed the financial accounts for the partnership for the period ending 30 June 2010;

(iv) agreed that the partnership pay the fees and expenses of Lowe Lippman in respect of the review undertaken by Mr Rathner that resulted in the execution of the consolidated accounts.

and as such, MYR is therefore bound by the 2009 accounts;

(d) MYR entered into an accord and executed the 2009 accounts in satisfaction of any cause of action it may have as to the parties' loan account balances and the assets and liabilities of the partnership as at 30 June 2009;

(e) alternatively, MYR is estopped by its conduct from asserting that the accounts did not fairly present the partners' financial position as at 30 June 2009;

(f) alternatively, an account was stated by LHND and MYR in respect of the debts, claims and demands of the partners; and

(g) alternatively, MYR should be precluded by the exercise of the court's equitable jurisdiction upon ordering the taking of partnership accounts from departing from the assumptions and methodology adopted in those accounts, including the identity of the assets and liabilities of the partnership as at 30 June 2009.

84 In response, in its "Contentions of Fact" dated 26 October 2012, and its "Contentions in Reply" dated 17 April 2013, MYR submitted as follows:

(a) to the extent that LHND's contentions are put forward pursuant to the amendment allowed on 13 March 2013, the 17 August orders amount to final relief in the proceeding, and the amendments constitute an attack on that final relief;

(b) the various claims and matters raised by LHND (as summarised in paragraph 83 above) have merged in the 17 August orders by reason of res judicata, or, at the least, LHND is prevented from now raising them by an Anshun estoppel;

(c) the 2009 accounts contain significant errors;

(d) there was no agreement by LHND and MYR to be bound by the statement of assets and liabilities, the profit and loss statement, and the methodology contained in the 2009 accounts;

(e) Mr Furman's signature on the director's declaration in the 2009 accounts did not constitute a warranty or representation by MYR;

(f) none of the matters relied upon by LHND constitute good consideration for the warranty, and in any event, LHND has not alleged that it relied upon any warranty or representation;

(g) LHND's contentions do not disclose the nature or terms of any accord entered into by MYR, the supposed causes of action compromised by MYR, or the resulting satisfaction said to be given to MYR;

(h) there is no operative estoppel preventing MYR from asserting that the 2009 accounts did not fairly present the partners' financial position; as LHND did not rely upon the declaration in the 2009 accounts to its detriment, or at all;

(i) it cannot be unconscionable for MYR to seek a proper taking of accounts so as to ascertain the truthful position of the parties. Indeed, equity would not provide for a result whereby MYR was bound by accounts that contain errors, potentially to the extent of millions of dollars;

(j) LHND's contentions regarding an "account stated" are fundamentally inconsistent with the 17 August orders, as an account stated is a bar to the taking of accounts, an order for which has already been granted;

(k) LHND's seeking an order in reliance upon the Court's equitable jurisdiction is fundamentally inconsistent with the 17 August orders, as final relief in equity has already been granted. No relevant equitable principle has been identified or engaged; and

(l) LHND and MYR are in a fiduciary relationship, there has been no significant delay, and there are no real grounds by reason of which it is suggested that it would be unjust to permit the taking of accounts generally.

85 The parties also filed contentions in respect of question (c), but both parties accepted that the answer to question (c) is inextricably linked to the determination of question (d). This is because the issue of the Westpac liability is intimately bound up with the issue of the accuracy of the partner's loan balances in the 2009 accounts. MYR has asserted that given that LHND was the sole borrower under the Westpac facilities, the question arises as to whether the LHND loan account with the partnership reflects or includes funds advanced by Westpac to LHND, then onlent to the partnership. If it does, then including the balance of the Westpac bill facility as a liability of the partnership amounts to double counting, such that the LHND loan balance is inflated. Queries have also been raised by MYR as to whether the Westpac bill facilities have been used solely for the purposes of the partnership. Although no direct evidence has been advanced to ground any such suspicions, I can ascertain from the correspondence between Green & Sternfeld and Lowe Lippman that Mr Furman's suspicions in that regard appear to be grounded upon alleged discrepancies between the amount of funds lent by Westpac to LHND in respect of particular projects and the actual construction costs of those projects.

86 Accordingly, if it is found that MYR is bound by the 2009 accounts, then MYR will be taken to be bound by the statement of liabilities in those accounts, including the liability to Westpac, and the liability to LHND, which will leave only the post 2009 accounts open for scrutiny.

87 In relation to paragraphs (a) and (b) of MYR's contentions referred to in paragraph 79 above, MYR repeats the submissions made in opposition to LHND's application to amend its statement of facts and contentions. In my ruling on that application, I rejected those submissions, and determined that:

(a) the function of the pleadings in the proceeding had been exhausted by the 17 August orders;

(b) the ambit of the dispute referred to me by the 17 August orders was defined and amplified by the parties' statements of facts and contentions, but that the ambit of those facts and contentions was not limited by the pleadings of the parties (and, indeed, both parties had been permitted to rely on matters which were not raised by the pleadings);

(c) as such the principles of res judicata and Anshun estoppel do not apply to the matters referred to me pursuant to the 17 August orders; and

(d) the 17 August orders conferred upon me the power to determine whether any other question is necessary and/or desirable to be determined to facilitate the taking of accounts; and

(e) the 17 August orders contained no express or implied limitation upon that discretion to confine the taking of accounts to questions arising out of or related to the issues raised by the parties in their pleadings.

88 Upon further reflection and review of MYR's submissions, I am not persuaded to depart from the view I expressed in my ruling on 14 March 2013. I note further that the question of whether MYR was bound by the 2009 accounts was a question expressly reserved for determination by the 17 August orders, so that it was recognised by the parties that this question had not been finally determined at this stage by the 17 August orders.

89 LHND contends that Mr Furman's signing of the 2009 accounts represented the final step in the conclusion of negotiations undertaken by the parties, as represented by Mr Rathner (and to a lesser extent, Mr Saltzman) on behalf of the Furman interests, and Mr Lebovits on behalf of the New interests, regarding both the entitlements of Furman Constructions to payment of construction expenses and project management fees, and the entitlements of the partners, and in particular, the balances of the parties' loan accounts. The signing of the 2009 accounts in December 2010 followed a lengthy process whereby Mr Rathner conducted an extensive, if not exhaustive review of the financial affairs of the partnership, so as to satisfy Mr Furman both that Furman Constructions had been adequately remunerated for its services, and that the statement of assets and liabilities in the 2009 accounts, in particular the balances of the partner's and the Furman Constructions' loan accounts, were accurate.

90 In its submissions, LHND relied upon the following facts and matters in support of its contentions:

(a) Mr Furman had been concerned since at least 2004 (if not earlier) as to the manner in which all developments were accounted for;

(b) Mr Furman had a firm hand and close eye on the accounts (and also on the construction costs);

(c) the claim that on the one hand Mr Furman relied entirely (without question) on Doug Black of Green and Sternfeld to account to him, but on the other hand he considered him to be a "crook" defies credibility;

(d) Mr Furman was and remained capable of protecting his own interests and was repeatedly concerned to do so. To suggest that he passively sat by and relied entirely on Green & Sternfeld to protect his interests without question defies belief;

(e) by 2009 the parties had in principle resolved to finalise the affairs of the partnership and undertake a rigorous examination of the financial affairs of each project on a project by project basis;

(f) Mr Rathner undertook a full investigation (which was not merely limited to construction costs or the Westpac bill facility) and conferred with Mr Furman in detail as to the outcome of his investigations, as one would expect from an experienced forensic accountant charged with such an investigation;

(g) negotiations then took place between Mr Lebovits and Mr Rathner (acting upon the instructions of Mr Furman) to agree upon and conclude final adjustments to the 30 June 2009 accounts that were favourable to the Furman interests;

(h) after reaching agreement regarding those adjustments in consultation with Mr Furman, Mr Rathner asked Mr Saltzman to review the accounts and Mr Saltzman found them to be "wholly in order";

(i) Mr Rathner also consulted Mr Furman regarding the form of the accounts and Mr Furman ultimately signed those accounts without further comment or objection and fully aware of the consequences of doing so;

(j) he executed the accounts without duress or undue pressure and his later assertions to the contrary are to be rejected;

(k) the fees of Lowe Lippman were agreed to be paid and were paid by the partnership in consideration of the agreement reached between the parties; and

(l) the agreement reached between the parties as evidenced by the correspondence from 20 August 2010 through to 25 November 2010 and ultimately concluded by the signing and exchange of the accounts was intended by the parties to be a final resolution of the issues then between them regarding previous accounts and developments.

91 Counsel for LHND submitted that some time after January 2011, Mr Furman changed his position, and determined to revisit and reconstruct past grievances in order to improve his position viz a viz the New interests. Further, Mr Furman is not averse to disputation and litigation with his business partners. Mr Furman has been prepared to accept the 2009 accounts as accurate when it suits him (say, in dealings with financiers, or in order to assist Furman Constructions' claim against the partnership in a VCAT proceeding), but prepared to dispute them in order to reconstruct, obstruct and delay the finalisation of the affairs of the partnership. Mr Furman's assertions as to duress, error, misrepresentation, lack of information, lack of advice, want of review, negligence, conflict of interest and the absence of advisors, whether raised directly by him, or his accounting or legal advisors on his behalf, cannot be made out on the evidence. The alleged "errors" referred to in MYR's statement of contentions, which repeat the allegations made by Mr Furman's solicitors in their letter to LHND's solicitors on 14 June 2012, have been shown by the evidence to be exaggerated and misconceived.

92 In response, in addition to MYR's contentions set out in paragraph 84 above, MYR submitted that the following allegation made by LHND was bad in form and in substance:

By reason of the execution of the consolidated partnership for the financial year ending 30 June 2009 by Moshe Furman on behalf of the defendant in about December 2010 the defendant agreed to be bound by the statement of assets and liabilities and profit and loss statement contained in those accounts and the methodology contained therein

93 MYR submitted that there were no allegations of the terms of the agreement, the performance of the agreement, breach of the agreement and/or any loss suffered by reason of such a breach. Further, the documents relied upon in LHND's particulars could not be said to be an agreement at all or to the effect alleged. To the extent that LHND relies upon the course of correspondence between the parties, LHND has not identified the terms to be implied, what facts and documents are relied upon, and how any such implied term would satisfy the test for implication of contractual terms laid down in BP Refinery (Westernport) Pty Ltd v Shire of Hastings.[31] Further, given that the correspondence was previously carried on between the accountants, there are no relevant allegations that the accountants had actual or ostensible authority, and the scope of that authority.

94 MYR also submitted that the meaning and effect of being "bound" is not articulated. The way in which the term "bound" is used by LHND and its alleged effect is embarrassing, such embarrassment being compounded by the failure to seek any relief in respect of any breach of the alleged agreement.

95 Finally, MYR contends that the alleged "agreement to be bound" is not made out on the evidence. The documents said to constitute the agreement, being the signed partners' declaration in the 2009 accounts, an email from Mr Rathner to Mr Lebovits dated 10 December 2010, and an email from Mr Rathner to Mr Lebovits dated 14 December 2010 cannot constitute an agreement. To the extent that the alleged agreement arises from the course of correspondence between Green & Sternfeld and Lowe Lippman between August 2010 and 14 December 2010, the correspondence indicates disagreement rather than agreement.

96 Counsel for MYR submitted that Mr Furman's evidence did not support a conclusion that there was an agreement between the parties to be bound by the 2009 accounts. In particular, Mr Furman's evidence was that:

(a) he had signed the 2009 accounts because Mr Lebovits asked him to do so, and had told him that "if we don't sign it, because we were already late, it's a big fine waiting for us;"

(b) he had not signed the 2009 accounts on the basis of advice from Mr Rathner, that Mr Rathner was not his tax agent, and that he had engaged Mr Rathner in a different capacity; and

(c) it was not within Mr Furman's contemplation that in signing the 2009 accounts he was making any agreement with Mr New that would preclude him from disputing the partnership financials at a later date.

97 Counsel for MYR submitted that the evidence of Mr Rathner did not support LHND's contentions that Mr Rathner was engaged to conduct a broad, general review of the partnership financial statements, and that the process and outcomes of the review, including entries and adjustments to draft financial statements and loan account balances, with those entries, adjustments and compromises incorporated into the 2009 accounts. Rather, Mr Rathner's evidence was that he was engaged to conduct three specific tasks; first, to identify what the construction costs and project management fees were for each project, and what was outstanding with respect to those fees; secondly, to confirm that the Westpac drawdown statements reconciled to the LHND loan account, particularly in respect of interest and fees paid by the partnership; and thirdly, to confirm that the refunds of GST in respect of claims made by Furman Constructions had been "taken up in the analysis".

98 Counsel for MYR submitted that Mr Rathner denied that he had been looking at the expenses of the projects on a line by line basis, or the costs of each of the projects, as opposed to construction costs. He denied that he was looking at the financial statements prepared by Green & Sternfeld with a view to seeing whether Mr Furman's interests were properly recorded: this was only true of the amount owing to Furman Constructions and MYR's loan account. He denied that he had fully investigated the Westpac bill facility and the interest charged on them: rather, he was satisfied that the interest on the drawdown statements matched up to the LHND loan account. He denied that he looked at the amounts received from the sale of the Mordialloc properties and where those monies went. He denied that he was to work out the balance of the LHND loan account: he was trying to assist so that it could be calculated, but that calculation may not have been done by him. While he looked at the accounting for the GST payments, he did not investigate the receipt of GST refunds and payments. Finally, despite having been asked by Mr Furman to conduct a one hundred per cent verification of the Westpac bill facilities for the partnership properties (including Poath Road), he did not undertake this task.

99 Counsel for MYR submitted that, in relation to the process of discussion and negotiation leading up to the 2009 accounts, Mr Rathner's evidence was that he never reviewed the 2009 accounts, that the negotiations between him and Mr Lebovits were in respect of attempts to compromise the amounts said to be outstanding to Furman Constructions on each project and flowing on from that the profits for each project. He then asked Mr Lebovits to provide to him the journal entries for each of these adjustments, which he then provided to Mr Saltzman. Any agreement between Mr Lebovits and him about the partnership accounts was limited to the topics which were the subject of his investigations.

100 While counsel for MYR conceded that the evidence demonstrates that as part of his review, Mr Rathner sought instructions from Mr Furman to agree to certain figures, the fact that certain figures were agreed as representing an accurate or compromised position of the parties on a specific partnership project or entitlement does not give rise to an agreement to be bound by these and all other figures in the 2009 accounts such as to preclude Mr Furman from seeking a taking of the accounts of the partnership.

101 Further, while MYR concedes that during a telephone call between Mr Rathner and Mr Lebovits on 27 October 2010 that an agreement was reached for an adjustment to be made to the 2009 accounts, there was no agreement reached during this telephone call regarding the form of the final 2009 accounts and the adjustments to be made. The evidence shows that no such agreement was reached on that date, because there remained outstanding issues in dispute, being the application of the sales proceeds of partnership properties, and Mr Furman's view that Westpac should not have imposed penalty interest on the commercial bill facility.

102 Also, counsel for MYR submitted that it was significant that on 1 November 2010 that, in a letter from Mr Lebovits to Mr Rathner, Mr New requested that Mr Furman and his associated entities provide to the partnership a release and acknowledgement that no further claims are to be made in respect of building costs and management fees and for Furman Constructions to produce tax invoices for the adjustments that have been implemented. No such release was ever provided, and in any event the release was only limited to construction costs and management fees, and, as such, evidences MYR's contention that the signing of the 2009 accounts would not extinguish any rights to pursue claims with respect to the accuracy of the 2009 accounts in general.

103 Finally, counsel for MYR submitted that, despite being repeatedly challenged by counsel for LHND as to whether he reviewed the 2009 accounts, Mr Rathner confirmed that he did not review, specifically, the profit and loss statement, balance sheet, or the notes to the accounts, and gave evidence that he did not review a number of matters crucial to any determination of the accuracy of the 2009 accounts, including:

(a) the partnership loan accounts as recorded in the books of the partnership;

(b) whether or not monies had been advanced to the partnership by Mr and Mrs New or any other entities associated with them, other than LHND; and

(c) whether the profits in relation to Charman Road had been brought to account in the partnership accounts.

104 In my view, the evidence demonstrates that there was an agreement between Mr New on behalf of LHND and Mr Furman, acting on behalf of both Furman Constructions and MYR, that Green & Sternfeld and Lowe Lippman would review and investigate the financial affairs of the partnership, with a view to reaching a final agreement regarding the entitlements of those parties to the assets of the partnership. Mr Furman's signing of the 2009 accounts amounted to his acknowledgment that the 2009 accounts were an accurate statement of the financial affairs of the partnership, including the loan account balances of the parties. This agreement was evidenced by conversations between Mr New and Mr Furman in 2009, the correspondence and other communications between Lowe Lippman and Green & Sternfeld during the course of 2009 and 2010, and Mr Furman's signing of the accounts.

105 The agreement by MYR and Furman Constructions that the 2009 accounts reflected the entitlements of LHND, MYR, and Furman Constructions was supported by valuable consideration passing from LHND, in particular:

(a) while there were concessions on both sides, the negotiations between the parties resulted in a substantial adjustment in favour of the Furman interests, in particular, a reduction of the LHND loan account balance of approximately $500,000, and a corresponding increase in the Furman Construction loan account balance;

(b) LHND agreeing that the partnership would assume the liability to pay the accounts rendered by Lowe Lippman totalling approximately $90,000, in respect of Lowe Lippman's investigations into the financial affairs of the partnership from the proceeds of sale of one of the Croydon properties. The fact that the proceeds of sale were also deployed to pay Green & Sternfeld's fees does not amount to a countervailing benefit, as the partnership was already liable to pay those fees in any event, given that Green & Sternfeld were the partnership's accountants; and

(c) LHND agreeing that the proceeds of any property sales, after payment of debt and other expenses, would be applied proportionally to the parties' loan accounts, rather than being applied first to reduce LHND's loan account balance with the partnership.

106 The submissions made on behalf of MYR were critical of the manner in which LHND had "pleaded" the allegation that MYR had agreed to be bound by the 2009 accounts in its amended statements of facts and contentions, in that LHND had not pleaded the terms of the agreement, any breach of the agreement, or any loss on the part of LHND. MYR submitted that the documents relied upon by LHND could not possibly constitute any agreement, and the "course of correspondence" by which the agreement could be held to be implied was not particularised, and in any event, could not give rise to an implied term.

107 The difficulty with these submissions is that while in some respects the parties' statements of facts and contentions resemble pleadings, they are not pleadings. On 14 September 2012 I ordered, after some discussion, that the evidence in the hearing of the determination of the preliminary question be by affidavit, and that the parties exchange contentions of fact. In other matters, I noted that "the exchange of contentions of fact will be helpful in narrowing the issues in dispute between the parties."

108 Accordingly, the function of the parties' filing and serving what ultimately became described as statements of facts and contentions was not, as would be the case with pleadings, to confine the hearing to matters which were expressly in dispute on the pleadings. They were an attempt to focus the attention of the parties and the Court on what were the real issues in dispute in respect of what were quite broadly framed questions in paragraph 5(1) of the 17 August orders. Given the function of the Statements of Facts and Contentions, I do not consider that I am bound, or that the parties are bound by the matters raised by the Statements of Facts and Contentions, subject of course to questions of onus. Ultimately, the answers to the preliminary questions are to be determined upon the evidence.

109 In my view, the critical matters in determining whether Mr Furman's execution of the 2009 accounts signified his agreement that MYR and Furman Constructions would be bound by those accounts include:

(a) the thrust and import of his discussions with Mr New in the first half of 2009 regarding his concerns about the financial accounting for the partnership;

(c) the knowledge of Mr Furman of the extent, objectives, and outcomes of the Rathner review;

(d) whether, during the course of the Rathner review, Mr New and Mr Furman compromised any disputes between the partners regarding quantum of their entitlements, or any related party's entitlements;

(e) the extent and manner in which any such compromises were reflected in, and given effect to, by Green & Sternfeld in their preparation of the 2009 accounts; and

(f) whether Mr Furman's execution of the 2009 accounts was conduct amounting to an agreement to be bound by the accuracy of the 2009 accounts, supported by consideration, or evidenced any such agreement.

110 LHND relied upon the evidence of Mr New, Mr Lebovits, and, to a lesser extent, Messrs Black and Rosenbaum. In his affidavit affirmed on 18 July 2012, Mr New deposed as follows:[32]

Prior to 2009, I would periodically speak to Moshe Furman about the development business. Sometimes I would speak to him about that business in person and sometimes via telephone.

In early 2009 my wife Hannah New (who is a director of the plaintiff) and I, Moshe Furman and Yvonne Furman (who is a director of the defendant) attended a meeting at our home. During that meeting Moshe Furman said that he was unhappy that GST refunds had been paid into the plaintiff's bank account. He also said he was unhappy with how Doug Black of Green and Sternfeld was accounting for the "partnership". I said that Green & Sternfeld and Lowe Lippman should work together and work out the GST issue and any other issues Moshe Furman had with how Doug Black was accounting for the "partnership". In response, Moshe Furman then said words to the effect that he agreed that this should occur.

.....

In or around the middle of 2009, I had a conversation with Moshe Furman during which he said to me he was still unhappy with the accounts and suggested that we should appoint Gideon Rathner of Lowe Lipmann to conduct a review of the accounts. In response I said to Moshe Furman that I did not believe that there was anything wrong with the accounts but I would agree to this review so that Moshe Furman would be satisfied that the accounts were in order.

111 In his affidavit affirmed on 18 February 2013, Mr New deposed, in summary, that he had discussed financing for the various partnership projects with Mr New prior to obtaining funding from Westpac Bank, that Mr Furman had attended a meeting with him and officers of Westpac regarding financing of the Hastings development, that he had, during some conversations with Mr Furman, stated words to the effect that he could ring Westpac whenever he wanted to discuss financing of the development projects, and that Mr Furman had, on a few occasions told him that he had contacted Westpac officers in relation to the financing of various developments.

112 Mr New gave very little oral evidence regarding these matters. It is apparent that he left the issue of how Mr Furman's concerns regarding the financial affairs of the partnership were dealt with almost entirely in the hands of Mr Lebovits, although the documentary evidence indicates he was consulted by Mr Lebovits and gave instructions to Mr Lebovits from time to time regarding these matters.

113 In his affidavit sworn on 7 December 2012 Mr Lebovits gave evidence regarding the following matters under the heading "question (c)":

(a) between December 2009 and February 2010 Green & Sternfeld prepared and provided to Lowe Lippman a schedule for each of the partnership properties disclosing the source of funding for each project and its application and copies of the Westpac drawdown notices corresponding to each project which illustrated the manner in which the Westpac bill facilities were accounted for in the partnership's accounts;

(b) between April 2009 and mid 2010 Green & Sternfeld corresponded with Lowe Lippman in relation to the Westpac bill facilities. Lowe Lippman made a number of requests for information and documents in respect of the Westpac bill facilities;

(c) on 26 March 2010 he had a telephone conversation with Mr Rathner, who said words to the effect that

we've made substantial progress in the conduct of the investigation, the bank bills are accepted and all allegations are dropped

(d) at a meeting on 27 June 2010 he asked Mr Rathner words to the effect:

Why did you undertake a complete check of all the commercial bill activity?

and that, in response, Mr Rathner said words to the effect that

Moshe instructed me to check every single commercial bill and not to do a random sample review to make sure that the interests and the bills were accurately recorded in the books of the partnerships.

114 Under the heading "question (d)", Mr Lebovits, in addition to exhibiting the correspondence between Green & Sternfeld and Lowe Lippman during the course of the Rathner review, deposed, in summary, as follows:

(a) Following an email sent by him suggesting a meeting between the News, the Furmans, and their respective advisors to resolve all outstanding matters, on 23 June 2010 he received a telephone call from Mr Furman. That telephone conversation was of approximately 50 minutes duration. At paragraph 82(b) of his affidavit, Mr Lebovits deposed as follows:

(i) Mr Furman stated words to the effect that he had an issue with $80,000 being his share of profit from 121 Charman Road. In response I said words to the effect that this issue needed to be resolved between him and Louis New.

(ii) Mr Furman stated a few times words to the effect that he left his share of profit in relation to the Poath Road Development and the Charman Road developments with Mr New's company. In response I said words to the effect that the profits/losses in the Partnership were reflected in the Partnership's accounts.

(iii) Mr Furman said words to the effect that Doug Black had a conflict of interest, was rude to him, was on Mr New's payroll, was untrustworthy, had reduced his profit share (and increased Mr New's profit share) and had engaged in a fraud on Mr Furman.

(iv) I said words to Mr Furman to the effect that after analysing Gideon Rathner's work in reviewing the Partnership's accounts, I felt that there were large discrepancies between Lowe Lippmann's work and those accounts but that there was goodwill between Gideon Rathner and me to settle all matters amicably.

(v) Mr Furman said words to the effect that he wanted Gideon Rathner to undertake the investigation of the Partnership's accounts because he felt that Gideon Rathner was independent and that he was confident that I and Gideon Rathner would sort out all the issues.

(vi) Mr Furman said words to the effect that if the investigation goes Gideon Rathner's way he does not want to pay Green & Sternfeld's fees. In response I said words to the effect that this was unfair and Green and Sternfeld had done a lot of work which was initiated by Moshe Furman and I would not agree to this.

(vii) Moshe Furman said words to the effect that the Partnership should pay the fees to Lowe Lippmann for their time in relation to their investigation of the Partnership's accounts.

(viii) Mr Furman said words to the effect that Mr New used money from the bank for his own purposes and not for the Partnership. In response, I said words to the effect that Mark Saltzman informed me in July 2009 during a telephone conversation that he was satisfied with the loan account owing to the plaintiff and that the figures were correct, the money borrowed from the bank by the plaintiff was on behalf of the Partnership and that Gideon Rathner did not test a sample of the Commercial Bills but did a full 100% test and traced every interest payment on each Commercial Bill.

(ix) I said words to the effect that Green & Sternfeld was aware prior to Moshe Furman initiating the investigation that monies were still owing to Furman Constructions for construction costs and that the quantum of those costs needed to be determined and that Green & Sternfeld were still awaiting invoices that were not raised by Moshe Furman. Further, in relation to the money owing to Furman Constructions, Gideon Rathner was undertaking a project-by-project analysis and that Green & Sternfeld and Lowe Lipmann would thereafter amicably resolve the amount outstanding to Furman Constructions.

(b) apart from the telephone call referred to above, he did not speak with Mr Furman regarding the 2009 accounts prior to Mr Furman signing the 2009 accounts; and

(c) in response to Mr Furman's allegation that he received "persistent pressure" from him in relation to signing the 2009 accounts, he deposed that during 2011, following receipt of correspondence from the ATO regarding provision of BAS for the financial year ending 30 June 2011, he had corresponded with Lowe Lippman, expressing concern about the consequences of not providing BAS to the ATO on time.

115 In Mr Lebovits' affidavit in reply affirmed on 25 March 2013, he responded in detail to Mr Saltzman's criticisms made in his affidavit sworn on 30 January 2013 of how Green & Sternfeld had accounted for various transactions in the partnership accounts, including the draw downs and interest payments on the Westpac bill facility, the use of GST refunds paid to LHND to reduce the indebtedness of the partnership to LHND, the accounting treatment of the profits realised by the Charman Road developments, an explanation of the accounting for the Poath Road development, and an explanation of the accounting for various sundry transactions. Mr Lebovits also responded to paragraphs 132 to 138 of Mr Saltzman's affidavit, which referred to discrepancies between the journal entries and trial balances which lay behind the 2009 accounts, and a schedule of the financial statements with respect to the Poath Road project provided by Green & Sternfeld to Lowe Lippman on 30 July 2010. Mr Lebovits conceded that an entry in the 2009 accounts understated the Furman Constructions Share of Profits Loan Account by $74,893. This error arose because of the failure to include the management fees payable by the partnership to Furman Constructions in the calculations regarding the Poath Road development which were the subject of correspondence between him and Mr Rathner between July 2010 and December 2010. He proposed that this error could be rectified by making an adjustment in the 2010 accounts to reduce LHND's loan account by $74,893, and increasing Furman Constructions' loan account by the same amount.

116 In this affidavit, Mr Lebovits also responded to various statements by Mr Rathner in his affidavit of 15 February 2013, in particular, to Mr Rathner's assertion that he only became aware of the partnership's Westpac "maxi account" when Mr Furman provided copies of bank statements to him.

117 Most of the focus of the crossexamination of Mr Lebovits at the hearing was on the question of whether Poath Road was a partnership property, rather than any of the matters referred to in his affidavit evidence regarding questions (c) and (d).

118 Mr Perry Rosenbaum, a solicitor engaged by the partnership in 2009 in relation to the subdivision and sales at the Mordialloc property, affirmed an affidavit on 25 March 2013, which put into evidence his correspondence with MYR and, on occasion, Lowe Lippman between April 2009 and April 2012 regarding the disbursement of the proceeds of sale of various partnership properties. Mr Rosenbaum was not required to attend court for crossexamination.

119 Mr Doug Black, in his oral evidence, stated, among other things:[33]

I specifically recall that Mr Rathner received all bank statements in relation to the partnership.

120 Mr Chan and Mr Blake of Bendigo Bank gave evidence regarding the provenance and source of information used to compile various internal bank memoranda prepared for the purpose of determining whether to provide finance to MYR for an unrelated development project. Mr Chan confirmed that he dealt with both Mr Furman and Mr Saltzman in the course of 2011 and 2012,[34] and that Mr Saltzmann provided him with copies of the draft 2010 accounts, and a statement of assets and liabilities for MYR signed by Mr Furman. This statement[35] refers to MYR owning three units at Mordialloc in its own right.

121 MYR relied upon affidavits sworn by Mr Moshe Furman, Mr Gideon Rathner, and Mr Mark Saltzman regarding the matters relevant to questions (c) and (d).

122 In his affidavit sworn on 25 January 2013, Mr Furman deposed as follows:

From time to time, I was given documents to sign, in my capacity as a director of MYR, to guarantor (sic) monies lent to LHND. Generally speaking, I agreed to the increases requested. I did this because, as a builder, it is always a comfort to know that you have money available to utilise for construction purposes. I also relied on Mr New's judgement that the Partnership required the additional finance being sought.

However, by 2009, I began to have grave concerns about the accuracy of Green and Sternfeld accounting of the Partnership's business and, based on my knowledge of the profits which were being made within the Partnership, considered that the additional financing sought was excessive and not required.

I instructed my accountants, Lowe Lippmann, to correspond with Green & Sternfeld about these matters, to seek documents in order to reconcile the facility drawdowns against the project expenditure.

Although some documentation was provided in a piecemeal fashion over a number of months, I was not able to satisfy myself of the accuracy of the loan account or the correctness of the accounting treatment, including with respect to the interest on the Westpac facility and the LHND loan account.

I now know that all GST refunds attributable to the Partnership's property development projects were paid directly by the Australian Taxation Office into the bank account of LHND and were not paid to the Partnership bank account. Had I been aware of the accounting treatment of the GST refunds due to the Partnership, I would not have signed the accounts, and I believe that a full reconciliation is required to properly bring to account in the books of the Partnership those GST refunds. I have personally examined some of the bank account statements for the LHND bank account number 235391 and I have identified numerous deposit credit entries described as 'Deposit ATO'. In the one batch of accounts which I have been able to analyse myself in this way, I identified approximately $525,000 of GST refunds which were in fact payable to the Partnership but which instead were paid by the ATO into the bank account of LHND. This occurred because Green & Sternfeld did not register the Partnership for GST but instead registered LHND, and thus the ATO remitted the Partnership GST refunds directly to LHND and not to the Partnership bank account.

My analysis of these payments is incomplete and I was therefore only able to identify partially the GST credits so paid, due to the fact I did not previously have access to the complete statements of the LHND bank accounts. I have been advised by my accountant that it is necessary to undertake a full accounting reconciliation of all the GST refunds received by LHND during the Partnership and an analysis of the interest incurred on LHND banking facilities that was allegedly paid by utilising the GST credits.

Even after I signed the 2009 Accounts in late 2010, I continued to instruct Lowe Lippmann to correspond with Green & Sternfeld to try and establish the true position of the Partnership. I believe that these issues have never been satisfactorily resolved, and in fact that Partnership is owed money by LHND rather than the other way around.

123 Referring to the email from Mr Rathner to Mr Lebovits of 20 August 2010, where Mr Rathner stated:

For the purpose of finalising issues to 30 June 2009, Mr Furman will agree to not pursue a number of small adjustments that resulted in differing claims between our letter dated 4 June 2010 and our letter dated 12 July 2010,

Mr Rathner told me the letter of 20 August 2010 was not a complete review of the Partnership projects as he was not able to review all the relevant financial documents.

124 Mr Furman also deposed as to the following matters:

(a) he made various comments upon the recounting of the telephone conversation between him and Mr Lebovits on 23 June 2010;

(b) he made various comments upon the recounting of the meeting between him and Mr Lebovits on 26 June 2011;

(c) in relation to Mr New's evidence regarding the meeting between him and his wife and Mr and Mrs New in early 2009, he agreed that he attended that meeting, but denied that he discussed the issue of GST at this or any other meeting. He raised the fact that he was not happy with the performance of Green & Sternfeld in general and Mr Black in particular, and in response, Mr New said words to the effect of "let's leave it to the accountants";

(d) in relation to Mr New's evidence regarding their conversation in mid 2009, he did not agree with the evidence of Mr New as to what was said, but deposed that had said words to the effect that he was not happy with Green & Sternfeld and the accounting for the partnership, and he believed that he and Lowe Lippman were not receiving a lot of information. He told Mr New that he wanted Lowe Lippmann to have a look at the books. At that time Mr Saltzman was his primary accountant and commenced the review. Mr Rathner took over because Mr Saltzman became ill;

(e) the version of the 2009 accounts signed by him was already signed by Mr New and Mr Lebovits at the time he signed them; and

(f) while he had received the fax from Mr Rosenbaum regarding the deposit of sale proceeds into the Westpac maxi account, he believed it was another partnership account.

125 Mr Furman was extensively cross-examined regarding the scope of the Rathner review, the extent to which Mr Rathner sought and obtained instructions from him during the course of the Rathner review, his knowledge of the existence of what was referred to as the Westpac "maxi account", his ability to obtain information regarding the financial affairs of the partnership from, among others, Green & Sternfeld and Westpac, the circumstances under which he signed the 2009 accounts, and his reliance upon the 2009 accounts for other purposes.

126 Mr Furman did not fare particularly well under cross-examination in relation to these matters. His evidence was often non-responsive and evasive and on occasion contradictory to his affidavit evidence and the contents of contemporaneous documents.

127 He was evasive about whether he did or did not instruct his bookkeeper and Lowe Lippman to prepare tax invoices to send to the partnership, or whether, despite having the view that Mr Black was "a crook", he told his bookkeeper to follow the instructions of Green & Sternfeld, including Mr Black, with respect to partnership matters.[36]

128 Mr Furman gave evidence that he signed the 2009 accounts at the request of Mr Lebovits rather than at the request of Mr Rathner,[37] and that Mr Lebovits had called him a number of times regarding the 2009 accounts and had made the point that if he did not sign it there would be "a big fine waiting for us".[38] He gave this evidence notwithstanding the fact that MYR had withdrawn any allegations that the 2009 accounts were signed under duress, his failure in his reply affidavit to respond to Mr Lebovits' evidence that the only time he discussed the 2009 accounts with Mr Furman prior to December 2010 was in the telephone conversation with Mr Furman in June 2010 referred to at paragraph 114(a) above, and the contemporaneous documents which show that Mr Rathner arranged for Mr Furman to sign the 2009 accounts in his office.

129 In relation to Mr Rathner's retainer, Mr Furman gave the following evidence under crossexamination:

(a) Mr Rathner was retained to do a summary of construction costs;[39]

(b) he was not sure whether he (Mr Furman) had sought a review of the partnership accounts;[40]

(c) he was involved in the process of Mr Rathner's review, and was provided with information provided by Green & Sternfeld to Mr Rathner;[41]

(d) he agreed that Mr Rathner was investigating the profits from Charman Road, that he was conducting a broad, general investigation into Mr Furman's business activities with Mr New, and how they had been accounted for in the past, but then reverted to saying that Mr Rathner was only investigating the construction costs;[42]

(e) he repeatedly answered questions with words to the effect that Mr Rathner relied upon the information provided by Mr Lebovits, which Mr Furman believed that was wrong, particularly with respect to GST;[43]

(f) he was evasive and equivocal about whether he provided Mr Rathner with instructions to agree to the characterisation and treatment of particular transactions. By way of example, in response to a question "So you are suggesting that Mr Rathner agreed to things without your permission?" he replied "I didn't say that"; [44]

(g) he stated on a number of occasions that there was information he discovered after he signed the 2009 accounts which showed the accounts were wrong. He gave evidence that after he signed the 2009 accounts, he showed them to Mr Rathner, and Mr Rathner was the first person to tell him there was a mistake, there was double dipping, with the amount of $2,230,000 appearing twice, once for LHND, and once for Westpac;[45]

(h) he was not aware of the Westpac maxi account until 2011, notwithstanding having been provided with copies of some letters from Mr Lebovits to Mr Rathner referring to that account, and enclosing statements from that account during the course of the Rathner review;[46]

(i) he agreed that he spoke to Westpac officers on occasion, and there was no barrier to him seeking information about the Westpac bill facilities if he wanted to do so;[47]

(j) he gave evidence that he was concerned about the accounting for the partnership prior to 2009, but particularly in 2009 when he discovered that GST money had not come back to him, about what he regarded as excessive financing being sought, and the profits of the partnership.[48] He was evasive regarding whether he raised any concerns he had about GST with Mr Rathner.[49]

(k) he gave contradictory evidence about when he discovered Mr Lebovits was a director of LHND, at one stage suggesting that he had discovered it in July 2009 (after he spoke to Mr New about his concerns about Green & Sternfeld) and later resiling from that;[50]

(l) he stated that he had a conversation with Mr New where he said, "I'm not happy" and Mr New said to him, "Look we've got some family connection we're all getting work (sic) let's leave it to the accountants to sort out the issues";[51]

(m) he stated that "In 2009 we decide, me and Mr New because of my concern, to pass everything to the accountants to try and sort out the issue that I was concerned. That's when Gideon got involved, Gideon Rathner";[52]

(n) he did not know that all of the GST refunds credited to the partnership by the ATO were paid to the bank account of LHND prior to signing the 2009 accounts, notwithstanding his complaints to Lowe Lippman about GST not coming back to him, and him having received copies of correspondence in November 2009 from Mr Lebovits to Mr Rathner which referred to this very fact; [53]

(o) he could not recall whether a dispute he had with another business partner which was the subject of litigation in the Federal Court in early 2009, concerned, among other things, whether his partner had properly accounted for GST;[54]

(p) he denied having a long telephone conversation in June 2010 with Mr Lebovits in the terms referred to in paragraph 82(b) of Mr Lebovits' affidavit of 25 March 2013, despite having commented on Mr Lebovits' recounting of that conversation in his affidavit of 17 April 2013, saying that he only ever had short conversations with Mr Lebovits, and he otherwise left it for the accountants to deal with each other, in accordance with his arrangement with Mr New;[55]

(q) Mr Rathner discovered the "double counting" issue regarding the Westpac advances after Mr Furman provided him with a copy of the 2009 accounts after Mr Furman had signed them. Mr Rathner told him that he could not give Mr Furman a true picture of the partnership affairs because he relied upon Mr Lebovits to provide him with information and he had not received all of the information he requested;[56]

(r) he was always suspicious of the accounting for the partnership, even when he signed the 2009 accounts, but he relied upon the accountants. After December 2010 he became more concerned about the accuracy of the accounts when he discovered there was unaccountable money moving to different accounts that had an impact on the loan accounts;[57]

(s) he agreed there were discussions between Mr Lebovits and Mr Rathner regarding the final form of the 2009 accounts, and that the discussions included the final loan account balances and money owing to Furman Constructions, but if he had known what he knows today, he would not have signed the 2009 accounts;[58]

(t) he conceded that the information in the statement of assets and liabilities given to Bendigo Bank was wrong, insofar that it referred to him owning three units in Mordialloc absolutely, but that all information provided to Bendigo Bank, including the draft 2010 partnership accounts, was provided to Bendigo Bank by his accountants;[59]

(u) he had seen a copy of the document which was a schedule of the financial analysis of the Poath Road development, and discussed it with Mr Saltzman at some stage, but the notation "agreed by MF" was not his handwriting, and he had reservations about the figures;[60]

(v) he agreed that in June 20 Furman Constructions issued a claim in VCAT against the partnership for the sum of $1.05 million in respect of the construction costs for Poath Road. The particulars of the claim referred to and relied upon the accounts said to have been verified by Green & Sternfeld and Lowe Lippman on 2 September 2010. However, this pleading was prepared by his solicitors;[61]

(w) when counsel for LHND put to him the proposition that "When it is convenient to you or your company you are prepared to rely upon the accounts prepared by Green & Sternfeld, aren't you?", he replied, "No comment". When pressed, he stated that he was not qualified, he had to rely upon the advice he was getting from his accountants;[62] and

(x) despite having received correspondence from Mr Rosenbaum regarding the distribution of the proceeds of sale of the Mordialloc properties, and a letter from Mr Lebovits to Mr Rathner on 29 September 2009 which referred to the proceeds of sale being used to discharge Westpac bill facilities held in respect of the Mordialloc and Croydon properties, he disagreed that he had received an accounting for the funds received from the sale of the Mordialloc properties.[63]

130 Under reexamination, Mr Furman gave the following evidence:

(a) the agreement between Mr Furman and Mr New was that the profits from the Charman Road development were to be contributed to the partnership as working capital, and were not intended to represent a liability to his interests in the accounts of LHND;[64]

(b) save for a payment to him of $206,000, all other profits were left in the partnership;[65] and

(c) in respect of the telephone conversation recounted at paragraph 82(b) of Mr Lebovits' affidavit, he had discussions of the nature referred to in Mr Lebovits' affidavit, but he believed the discussion was in a meeting with Mr Lebovits, not a telephone call.[66]

131 In short, what emerged from Mr Furman's oral evidence is that, despite agreeing with Mr New that the parties' respective accountants would confer regarding any outstanding concerns that Mr Furman might have, and having been fully informed by Mr Rathner of his activities and having been provided with copies of correspondence with Mr Lebovits, in circumstances where he had suspicions for many years regarding Green & Sternfeld's accounting for the partnership, and in particular the distribution of GST refunds, he was adamant that certain matters only came to his attention after he signed the 2009 accounts in December 2010, with the explanation being that Mr Lebovits had withheld information from Mr Rathner. This, with respect, is inconsistent with the largely uncontested affidavit evidence of Mr Lebovits (who was not seriously challenged regarding his conduct during the course of the Rathner review), the concessions made by Mr Rathner under crossexamination, and the contemporaneous documents passing between the parties.

132 Mr Furman's advisors at Lowe Lippman, Mr Mark Saltzman and Mr Gideon Rathner, deposed to various matters in respect of the Rathner review and the 2009 accounts. Mr Saltzman's affidavit of 30 January 2013 focussed upon the background to the establishment of the partnership, specific criticisms of the manner in which Green & Sternfeld recorded various transactions in the partnership accounts, including the manner in which Furman Constructions' entitlement to profits under the Charman Road developments was recorded, and particular concerns about the partnership accounts.

133 Mr Rathner and, to a lesser extent, Mr Saltzman, were also cross-examined regarding the Rathner review, the lead-up to Mr Furman's execution of the 2009 accounts, and their access to documents regarding the affairs of the partnership.

134 During the course of cross-examination, both Mr Rathner and Mr Saltzman exhibited some discomfort regarding what at times was apparently a conflict between their loyalties to their longstanding client and their duties to the Court. Some of their affidavit evidence also seemed calculated to put a particular "spin" on issues in the proceeding consistent with MYR's position regarding the scope of the Rathner review and the accuracy of the partnership accounts.

135 By way of example, Mr Saltzman's criticisms of Green & Sternfeld's accounting treatment of particular transactions, on closer analysis, went to matters of form, rather than substance. However, when it came to giving their oral evidence at the hearing, it was apparent that they considered that their duty to be frank and truthful in Court took supremacy over other considerations, although some inconsistencies remained. In particular, both Mr Rathner and Mr Saltzman remained steadfast in their denials that Mr Rathner conducted a comprehensive and thorough review of the financial affairs of the partnership during the course of 2009 and 2010, and in their statements that they did not review the 2009 accounts prior to Mr Furman signing the 2009 accounts. These statements are inconsistent with the contemporaneous documentation generated during the course of the Rathner review. Further, it is almost inconceivable that reliable, cautious and capable professionals such as Mr Rathner and Mr Saltzman, acting on behalf of a demanding and suspicious client, would have arranged for Mr Furman to sign the 2009 accounts without being satisfied of their accuracy.

136 Mr Rathner's affidavit and oral evidence assumed particular significance in the course of determining whether Mr Furman, on behalf of MYR and Furman Constructions, was bound by the 2009 accounts. In the case of Mr Rathner, in his affidavit affirmed on 15 February 2013, he deposed, in summary, to the following matters:

(a) his professional background and years of experience as a forensic accountant and registered liquidator;

(b) that between September 2009 and February 2012 he provided advice and services to MYR and Furman Constructions with respect to the construction costs of various developments of the partnership;

(c) that Mr Furman told him that LHND had arranged finance for the partnership projects through Westpac, and he confirmed that through his review of the Westpac bill facility documentation. This borrowing structure caused him difficulties in subsequently verifying the advances of Westpac funds into the partnership's bank account because Mr Furman did not have documents, and he (Mr Rathner) did not have the relevant facility agreements stating the terms of the finance provided by Westpac. He worked from the LHND partnership loan account provided to him by Mr Lebovits, and bill rollover statements, and was not working from the partnership accounting records;

(d) that referring to the letter of Mr Saltzman to Mr Lebovits dated 31 August 2009 which requested that various documents be provided to Lowe Lippman to enable it to "undertake an examination and reconstruction of the financial statements from the Partnership's inception to the current date":

Despite the terms of Mr Saltzman's email I did not undertake, nor was I appointed to conduct, a full-scale review of the accounts and financial records of the Partnership.

(e) instead, he deposed that he undertook the following tasks:

(i) a review of the project construction costs and funding in order to determine the actual cost of construction for each project and any surplus or shortfall of funds paid by the partnership to Furman Constructions for the construction of each project;

(ii) an analysis of the loan accounts arising out of the Charman Road joint ventures, in particular, attempting to determine claims for profit share due to the Furman interests with respect to the Charman Road projects;

(iii) he sought to trace the interest and fees charged to LHND under the Westpac bill facilities to the LHND partnership loan account, in order to determine whether the interest charged to LHND by Westpac was the same amount of interest that LHND charged the partnership for this borrowing and was recorded in the LHND loan account in the books of LHND. While he did not verify monies received into bank accounts, or payments made with respect to individual projects, he was satisfied that the interest and charges recorded in the Westpac bill facility statements matched the amounts entered into the LHND partnership loan accounts; and

(iv) after preparing his report on 19 February 2010, he raised four matters with Green & Sternfeld regarding the tasks he undertook, including two transactions relating to the Mordialloc project totalling $360,240, the capitalisation of interest of $440,000 for the Mordialloc project, and the possibility that this had occurred on other projects, Mr Furman's instructions that he had not received GST refunds, and the Westpac loan to LHND being separately recorded in the balance sheet of the partnership;

(f) he provided a chronology of the correspondence between him and Mr Lebovits over the course of the review and commented upon various extracts of this correspondence;

(g) in particular, in his letter to Mr Lebovits on 23 October 2009, he requested that Mr Lebovits provide him with all of the bank statements for the partnership, he deposed as follows:

Although I asked Mr Lebovits to send me "all the statements", it was not until Mr Furman later provided me additional Westpac bank statements which he told me he had received directly from Westpac that I realised that I had not been provided by Mr Lebovits with all the bank accounts relevant to partnership transactions.

I have therefore not verified or reconciled the transactions in the Maxi account number 033 002 207943, nor the Maxi account number 003 002 113 165. In order to properly determine the respective positions of the Partners, it is necessary that those bank accounts be analysed and their effect on the loan accounts, if any, be properly understood;

(h) on 16 November 2009 he wrote to Mr Lebovits with the first version of his analysis enclosing:

(i) a schedule relating to amounts owing to "Furman Group Pty Ltd" on the Charman Road projects;

(ii) a summary of construction costs by project for Poath Road, Hastings, Croydon, and Caulfield South;

(iii) a schedule detailing the GST refunds received for each of Hastings, Croydon, Caulfield South and Mordialloc; and

(iv) copies of invoices raised by Furman Constructions to LHND for the Caulfield South and Mordialloc projects.

This initial report was revised and an updated report was provided to Mr Lebovits on 19 February 2010.

(i) on 12 February 2010 he wrote to Mr Lebovits to ask for a "detailed reconciliation of the amount of the [Westpac] debt of $2,230,000". He requested this reconciliation because Mr Furman had been asked to execute a further Business Finance Agreement on behalf of MYR as guarantor for the whole of the debt, in circumstances where Mr Furman had concerns that the Westpac funds may not have been fully applied for the benefit of the partnership;

(j) in response to Mr Lebovits' letter of 8 April 2010, where Mr Lebovits stated, among other things,

Accordingly you accept that the loan balance owing by ... the Partnership to my client is in the region of $1,900,000 subject to final reconciliation.

Mr Rathner deposed that on 20 April 2010 he had a telephone conversation with Mr Lebovits whereby he informed him that he would be unable to verify or confirm that the LHND loan balance was $1,900,000 until the interest liability was resolved and profit per project agreed;

(k) in his email of 26 August 2010, Mr Rathner wrote that "the Westpac commercial bills and interest charge is not in issue", because was satisfied that the drawdowns and interest were recorded in the LHND partnership loan account in the LHND books. However, this subsequently became an issue after the capitalisation of interest on the Mordialloc loan funds became apparent;

(l) while he made reference in his affidavit to his correspondence with Mr Saltzman regarding the 2009 accounts and writing to Mr Lebovits to tell him that Mr Furman had signed the 2009 accounts, he did not depose to any discussions he had with Mr Saltzman or Mr Furman regarding the 2009 accounts;

(m) he deposed as to the chronology of correspondence between Green & Sternfeld and Lowe Lippman in 2011 after Mr Furman had once again raised concerns about the partnership accounts. On 1 August 2011 he wrote to Mr Saltzman commenting upon this correspondence. He deposed that he wrote to Mr Saltzman regarding a new issue that had arisen, as follows:

Mr Furman has recently raised certain concerns regarding the Maxi Account paid into the partnership cheque account and withdrawn out of the cheque account within 24 hours. I confirm that I did not investigate the Maxi account as part of my review. My review was focussed on the construction costs, accounting for the partnership, GST refunds and the parties' loan accounts. I made no comment on the financial statements

(n) on 20 February 2012 he wrote to Mr Lebovits to alert him to a number of matters he said were not known to him at the time his updated report was provided to him on 4 June 2010, and which significantly affected the calculations contained within that report. His letter dealt with three matters:

(i) construction costs/progress claims ($360,240) made by Furman Constructions on Mordialloc;

(ii) Westpac interest ($440,000) drawdown by LHND regarding Mordialloc; and

(iii) the accounting for the Westpac debt ($2,230,000); and

(o) the remainder of his affidavit dealt in more detail with the issues referred to above.

137 In his affidavit in reply, Mr Rathner referred to the affidavits of Mr Black and Mr Lebovits made on 25 March 2013, and:

(a) accepted that he had received copies of the bank statements referred to in paragraph 136(g) above prior to Mr Furman signing the 2009 accounts, but did not reconcile the amounts set out in the Maxi account with any financial records of the partnership as part of his review;

(b) in relation to one of the queries raised by him in his letter to Mr Lebovits dated 20 February 2012, he accepted that Furman Constructions had been reimbursed, from the partnership the sum of $200,000 on account of an open space contribution for the Mordialloc project, but said that it should have been recorded in the 2009 accounts as a partnership expense, not a construction expense;

(c) in relation to the alleged capitalisation of interest payable on the Westpac bill facility for the Mordialloc project, he accepted Mr Lebovits' accounting for the drawdown of the funds and the payment of interest, but stated that the manner in which the funds were drawn down caused the partnership to incur interest liabilities earlier than it otherwise would have; and

(d) the 2009 accounts provided by him to Mr Furman to sign had been already signed by Mr Lebovits and Mr New prior to him providing them to Mr Furman to sign.

138 In his oral evidence, Mr Rathner confirmed his professional expertise and experience in insolvency and business reconstruction. While initially under crossexamination he maintained the position that he was only engaged to conduct a limited review of the financial affairs of the partnership, it became apparent when he was taken to particular aspects of the correspondence that the scope of his review was not so limited and he conceded as such.[67] When asked about the objectives of his review, he responded as follows:[68]

They came down as I recall to three matters. One is identify what the construction costs are for each project including management fees due. What had been paid to the builder for construction on each project to identify what was outstanding ... to the builder. To confirm that all of the Westpac drawdown statements reconciled to the New loan account for the amounts, particularly interest and fees paid by the partnership and also to confirm that the GST refunds of Furman Constructions had been taken up in the analysis.

139 Mr Rathner also agreed that part of his review was to investigate the profits from the Charman Road developments, in particular:[69]

What the profit was and whether each partner had received an entitlement.

140 Mr Rathner agreed that as part of the review process he generally worked very closely with Mr Furman to tell him what was going on, and that he provided the information provided to him by Green & Sternfeld to Mr Furman for review and instructions.[70] He accepted the accuracy of Mr Lebovits' note of a meeting between them on 27 July 2010, where Mr Lebovits said words to the effect

Why did you undertake a complete check of all of the commercial bill activity?

Moshe instructed me to check every single commercial bill and not do a random sample review to make sure that the interest in the bills were accurately recorded in the books of the partnership.

141 Mr Rathner gave evidence that he did not review the 2009 financial statements, or negotiate about journal entries and adjustments, but rather he negotiated to try and reach a compromise agreement between the parties as to the construction costs, and, flowing on from that, the profits for each project. He then asked Mr Lebovits to provide to him the journal entries that recorded those adjustments, which he provided to Mr Saltzman for review. Mr Saltzman told him that they were all in order. He does not recall Mr Furman seeking his advice about the 2009 accounts before he signed them.[72]

142 Mr Rathner gave evidence that he did believe there was some pressure from Mr Lebovits regarding Mr Furman signing the 2009 accounts. His recollection was that the urgency of the matter was related to the pending renewal of the Westpac bill facility, not the imposition of penalties by the ATO.[73] He did not recall Mr Furman telling him that he was under pressure to sign the accounts. He agreed that if Mr Furman had told him that he was under pressure to sign the 2009 accounts, he (Mr Rathner) would have advised him not to sign them. He agreed that it was likely that Mr Furman would have sought advice from Mr Rathner or Mr Saltzman if he found himself in those circumstances.[74]

143 In relation to specific issues about the accounting for the partnership, Mr Rathner gave evidence that:

(a) both he and Mr Furman understood how the partnership projects had been financed, that is, that funds were advanced from Westpac to LHND;[75]

(b) he looked at the profits from the Charman Road development to a limited extent;[76]

(c) he did not recall an issue about whether a $125,000 open space contribution for the Mordialloc project was a construction expense or a partnership expense but he agreed that this was a transaction he had examined during the course of his review;[77]

(d) he did undertake a reconciliation of drawdowns from the Westpac bill facilities and interest payments under those facilities for each partnership project;[78]

(e) he discussed the exercise above with Mr Furman, and the statement made in his email to Mr Lebovits on 26 August 2010 that "We also confirm that the Westpac commercial bills and interest charged is not in issue" is a statement he made on the instructions of Mr Furman;[79]

(f) he agreed that part of his review involved looking at the partnership financial statements prepared by Green & Sternfeld to ensure Mr Furman's interests were properly recorded in Furman Constructions' loan account and the partners' loan account;[80] and

(g) he agreed that the statements in his first affidavit regarding when he first became aware of the partnership Maxi account were incorrect.[81]

144 When taken to the initial correspondence between Mr Saltzman and Mr Lebovits and Mr New prior to the commencement of his review in September 2009, Mr Rathner gave evidence which is difficult to reconcile. When shown Mr Saltzman's letter of 31 August 2009, he responded that he did not consider that his review involved obtaining, in order to pass on to Mr Furman:

a full historical record and reconciliation of the capital and loan accounts with L & HY New Developments and MYR Investments since inception disclosing capital contributed and/or lent to the partnership.[82]

145 However, he agreed that he was trying to assist in the calculation of the LHND loan account, even though that calculation may not have been undertaken by him, with a view to reach finalisation or agreement between the partners as to the final balance of the loan accounts as at 30 June 2009. He agreed that his task was to undertake a reconstruction of the funds received and the funds paid out project by project.[83]

146 Mr Rathner gave evidence that during the course his of review in 2009 he fully understood that the Westpac funding had been provided via the bank account of LHND, and that he was aware in 2009 that LHND had a liability to Westpac of about $2.23 million.[84]

147 Mr Rathner was taken to the letter from MYR's solicitors to LHND's solicitors dated 14 June 2012, which stated as follows:

For the avoidance of doubt, we confirm as follows:

1. Gideon Rathner was engaged only to prepare a summary of construction by project for the partnership. He was not engaged for a fullscale review of the financials of the partnership.
2. Mr Rathner and Mr Lebovits subsequently conferred and made amendments to the summary.
3. At the time of preparing the summary of the partnership projects, Mr Rathner was not properly advised regarding the partnership's affairs, including the following matters:

1. The liability to Westpac (as stated in the 2009 partnership financials). In particular Mr Rathner was not made aware that the liability to Westpac of $2.23m was a liability of L & H New Developments Pty Ltd and not the partnership. 2. The GST refunds of $687,073.30 were never received by Furman Constructions (Vic) Pty Ltd.

1. The joint venture profits of in excess of $800,000.00 which the partners had agreed to apply as capital to the partnership projects.
2. These are matters of which Green & Sternfeld was or ought to have been aware.
3. Mr Rathner was not aware of the above matters prior to Mr Furman signing the 2009 partnership financials, which Mr Furman did in November 2010 under the threat stated by Mr Lebovits that huge penalties would be payable if the tax return was not lodged.

148 He agreed that the following statements in the letter were incorrect:

(a) "Gideon Rathner was engaged only to prepare a summary of construction by project for the partnership";[85] and

(b) "At the time of preparing the summary of the partnership projects, Mr Rathner was not properly advised regarding the partnership's affairs, including ... [that] the liability to Westpac (as stated in the 2009 partnership financials). In particular, Mr Rathner was not made aware that the liability to Westpac of $2.23 million was a liability of L & H New Developments Pty Ltd and not the partnership".[86]

149 Mr Rathner gave evidence that he agreed with the statement in the letter that he was not engaged for a fullscale review of the financials of the partnership.[87] He was unsure about the accuracy or otherwise of the statement regarding GST refunds which were said not to have been received by the partnership.[88]

150 In relation to the question of the joint venture profits in excess of $800,000 which the partners had agreed to apply as capital to partnership projects (this presumably refers to the profits realised on the Charman Road projects, or the combined profits of the Charman Road and Poath Road projects) Mr Rathner gave evidence that he was not aware what the joint venture profits were or were likely to be in June 2009. However, his recollection was that in relation to Charman Road, he reached an agreement with Mr Lebovits regarding the Charman Road profits, upon the instructions of Mr Furman. He also believed he reached an agreement with Mr Lebovits about the financials for the Poath Road project.[89]

151 Mr Rathner was questioned about a meeting held between him and Messrs Lebovits and Black on 11 March 2010 not long after the production of the Rathner report in February 2010 and the matters discussed during that meeting, and verified that his notes of that meeting were accurate.[90]

152 Mr Rathner was also taken to some correspondence from Green & Sternfeld which disputed some aspects of Mr Rathner's summary of construction costs. Mr Rathner agreed that this correspondence reflected a process whereby the two "camps" were identifying the differences between them with a view to trying to work out or reach agreement as to the final figures for 30 June 2009, but only with respect to construction costs.[91]

153 Mr Rathner gave evidence that he provided the schedule showing his summary of construction costs to Mr Furman, and that he discussed them with Mr Furman.[92] He agreed that he had told Mr Lebovits that he accepted the contents of the Westpac bill facility documentation.[93] In response to a statement in correspondence from Mr Lebovits seeking confirmation that the balance of the LHND loan account was approximately $1.9 million, he told Mr Lebovits that he was unable to verify that until the question of interest liability was resolved and the profit per project was agreed. When it was put to him that these matters were ultimately resolved, he responded "yes and no".[94]

154 Mr Rathner maintained that despite him being provided with the 2009 accounts, he did not review them. He provided a copy to Mr Saltzman and asked him to check whether the agreed adjustments to the Furman Constructions loan accounts had been made, and he asked Mr Lebovits to confirm that the adjustments to the loan accounts were inclusive of GST. He agreed that Mr Saltzman told him the 2009 accounts were all in order.[95]

155 Mr Rathner was asked about a meeting he attended on 27 July 2010 with Messrs Lebovits and Black, where they went through the construction costs on a project by project basis. He agreed he made a notation on his file note of the meeting "Accepted by M. Furman". The file note also made a reference to Westpac wanting to be provided with the 2009 accounts. He was questioned about Mr Lebovits' record of this meeting.[96] He did not recall discussing a "one hundred per cent verification of commercial bills for the Hastings, Mordialloc, Croydon, Caulfield and Hughesdale (Poath Road) projects", and said that he did not carry out a one hundred per cent check. He did agree that he probably did tell Mr Lebovits that Mr Furman had requested he conduct a one hundred per cent check because he did not trust the accounts were accurate as to the amounts owing to LHND.[97]

156 Mr Rathner was then taken to his file note of a telephone call he had with Mr Lebovits on 2 September 2010. Mr Lebovits told him he and Mr Black had met with Mr New and reviewed the amended schedules with him. Mr Lebovits told him that Mr New "accepted cash", that is, the claims made by Furman Constructions for construction expenses paid in cash, and confirmed agreement with the figures for the Poath Road, Hastings and Croydon projects as referred to in Mr Rathner's email of 26 August 2010. There was further discussion about adjustments for the Caulfield South and Mordialloc projects, and a notation that "amount Green & Sternfeld agree owed to Furman $202,319".[98] He agreed that afterwards he telephoned Mr Furman and told him what was discussed during the course of this telephone conversation.[99]

157 Mr Rathner accepted that Mr Lebovits sent him draft 2009 accounts on 16 September 2009, but he did not review them to the point where he could say they were accurate or otherwise.[100] He did not have a specific recollection of a telephone conversation he had with Mr Lebovits on 27 October 2010. However, he did not dispute Mr Lebovits' evidence that they spoke on that day and Mr Rathner told him that Mr Furman had agreed to an adjustment of $40,000 in respect of the Charman Road projects. He did recall telling Mr Lebovits that the distribution of the proceeds of property sales should be applied first to repay Westpac, then payment of accountants' fees, then a proportional repayment of loan accounts, and that Mr Furman was concerned about Westpac charging penalty interest.[101]

158 It was put to Mr Rathner that on 27 October 2010 he had reached agreement with Mr Lebovits regarding the final form of the accounts and the adjustments to be made, and he replied, "No". However, when taken to his email to Mr Saltzman of that date,[102] which commenced, "Mark, finalised issues re Furman!" he agreed that it was a significant achievement to finalise issues regarding Furman at that stage, and it was his intention to review the 2009 accounts with Mr Saltzman. He agreed that the reference to the application of the proceeds of property sales in his email referred to an agreement he had reached with Mr Lebovits earlier that day.[103]

159 He was aware that the fees owed to his firm by Mr Furman amounted to some $90,000 by that stage, but he was not concerned about those fees being outstanding.[104] He agreed that the final version of the 2009 accounts were to be sent to him (incorporating agreed adjustments) prior to Mr Furman considering Mr New's request for a release from any further claims with respect to construction costs and management fees. He did not recall whether he asked Mr Furman to come into his office to sign the 2009 accounts or having a discussion with Mr Furman about the 2009 accounts.[105]

160 Mr Rathner maintained that he did not undertake a detailed review of the 2009 accounts, but he did look at the accounts to confirm that the amounts owing on construction had been adjusted in the loan accounts, and sought confirmation from Mr Saltzman that that was in fact the case.[106] He agreed that Lowe Lippman's outstanding fees as at 9 February 2011 had been paid from the proceeds of sale of one of the Croydon properties, and this was consistent with the agreement he had reached with Mr Lebovits on 27 October 2010.[107]

161 During the course of re-examination by MYR's counsel, Mr Rathner gave the following evidence, in summary:

(a) he did not review the financial statements of the partnership, being the profit and loss statements and the balance sheet, or the notes to the accounts;[108]

(b) he did not verify the loan accounts of the partnership;[109] and

(c) he believed that the LHND loan account balance in the 2009 accounts included the borrowings from Westpac.[110]

162 Mr Saltzman's evidence regarding the Rathner review and the lead up to the signing of the 2009 accounts was relatively limited. In his affidavit of 30 January 2013, Mr Saltzman provided some background in respect of the business dealings between Mr Furman and Mr New, including the Charman Road projects, and the failure of the parties in the early 2000s to reach agreement upon the final profit shares in respect of these developments. He commented upon the treatment of the Charman Road profits and the Poath Road project in the accounts of LHND, and gave evidence regarding the purchase of the Poath Road property. He criticised the accounting treatment of the funds borrowed from Westpac by LHND and on lent to the partnership. At paragraphs 52 to 55 of his affidavit, Mr Saltzman deposed as follows:

Throughout the Partnership accounts, up to and including the accounts for the year ending 30 June 2009, a substantial loan has been brought into existence owing by the Partnership to LHND. I have not been able to verify the basis upon which that loan was created and very substantially increased, as my previous correspondence to Green & Sternfeld seeking to understand that loan remains unanswered. This implies, however, that the Westpac funding for the Partnership developments was insufficient and that the Partnership required very substantial additional funding that was provided by LHND directly. However, the Westpac funding appears to have been sufficient, in circumstances where the projects were all fully funded and secured against the underlying project assets.

There is no explanation in the financial records for the creation of the loan shown as owing by the Partnership to LHND, as there are no documents evidencing such a loan or the terms of the loan or what, if any, security was given by the Partnership to LHND for that loan.

In order to determine whether that loan is a genuine liability and whether funds were actually advanced by LHND to the Partnership for Partnership purposes, it would be necessary to undertake the exercise that I identified in my letter to Mr New himself dated 20 August 2009. This includes:

obtaining a detailed history in relation to the recordings from inception of the partnership with regard to capital contributed and/or funds lent to the Partnership, repayments of Capital, accretion to the Loan Account with regard to income distributions from the Partnership, and the drawing of funds in respect to repayments.

To the extent there was a contribution required from the Partners, the undistributed profits made by the Partners with respect to the Partnership projects would have gone a long way to satisfying, if not entirely satisfying the need for such a contribution.

163 Further, in relation to the size of the Westpac and LHND loan accounts in the partnership accounts, Mr Saltzman deposed as follows:

As I have already explained above, the Westpac Facility financing of Partnership projects should have been accounted for solely in the LHND accounts and the LHND partnership loan account should have been used to record the loans to and repayments from the Partnership. This not having been done, there are, inexplicably, bank loans recorded in both sets of accounts in addition to the very substantial LHND Partnership loan account allegedly also owing by the Partnership to LHND.

Only a careful reconstruction trading the sources and applications of funds to the Partnership projects can reveal whether the Westpac Facility funds and the other 'loans' have been applied correctly to the Partnership development projects or not.

There is no explanation from LHND or its accountants as to how the balances of the Westpac loan account and the other loan accounts have been arrived at and there is no reconciliation of those amounts with the project expenditures during the course of the Partnership.

In my correspondence with Green & Sternfeld, I repeatedly stated the only way in which a reconciliation could be satisfactorily performed, and conclusions reached in respect to indebtedness due to each of the Partners, was for an analysis to be performed on a project by project basis with sources and application of funds and derivation of profits covering all of the projects that the two parties had undertaken. Mr Lebovits responded to my repeated request, on more than one occasion, with words to the effect that Mr Furman had signed the 2009 financial accounts, that the accounting treatment of the Partnership was thus already agreed and, as such, obviated the need for any such reconciliation and analysis.

I have never been provided with the full set of materials requested that would have enabled me to verify the loan accounts and the application of those funds.

164 In relation to the Rathner review, Mr Saltzman deposed, in summary, to the following matters:

(a) between mid September to mid November 2010, he was away from the office, and not involved in the day-to-day supervision of the Furman account.

(b) he criticised the accounting of the partnership being conducted on a financial year basis, rather than a project by project basis; and

(c) in relation to the final draft of the 2009 accounts sent by Mr Lebovits to Mr Rathner on 22 November 2010, Mr Saltzman deposed as follows:

Mr Rathner requested that I review these statements. On 25 November 2010, I emailed Rathner to say that the 2009 financial accounts appear to be 'wholly in order'. I did not undertake more than a reading of those parts of the accounts that Rathner had asked me to look at. I was certainly aware that Mr Furman was strongly of the view that other aspects of the accounts were inaccurate and that my correspondence to Green & Sternfeld had remained unanswered in important respects and we had not been able to verify a number of important items such as loan accounts, for example.

After he signed the accounts, and after I had returned to the office in late November 2010, Mr Furman continued to instruct me to correspond with Green & Sternfeld with a view to have the Partnership accounts verified, notwithstanding, that he had, as in previous years signed the partner's declaration to the accounts in order that the Partnership tax return could be completed and lodged.

165 In the course of his crossexamination at the hearing, Mr Saltzman gave evidence, in summary, as follows:

(a) the sole source of information used by him to prepare the MYR financial accounts was the financial statements for the partnership prepared by Green & Sternfeld;[111]

(b) when taken to his email to Mr Rathner of 25 November 2010, which stated:

As requested I now advise and confirm as follows: I have reviewed in detail the 2009 year end set of financial accounts and the taxation returns for the partnership. I confirm that the adjusting entries and additional items to have been included have now been adjusted for. They appear to be wholly in order.

he disagreed that he was confirming to Mr Rathner that he had reviewed the accounts and that they were appropriate to sign;[112]

(c) he discussed the 2009 accounts with Mr Furman at around the time Mr Rathner prepared his report about construction costs;[113]

(d) he recalled that at a meeting between him, Mr Black and Mr Furman in about March 2004 Mr Furman expressed his displeasure regarding the manner in which the accounts for the Charman Road projects had been prepared and his entitlements under those accounts, and accused Mr Black of being crooked in his accounting;[114]

(e) he would have expected, in those circumstances, for Mr Furman to be watchful and questioning, and he agreed that Mr Furman "kept a firm hand and a close eye on what was coming out of Green & Sternfeld";[115]

(f) Mr Furman raised concerns with him about the partnership accounts from time to time, and particularly in 2009;[116]

(g) Mr Furman wanted to have someone to have a good look at the accounts. He couldn't recall whether it was Mr Furman or himself who suggested that Mr Rathner undertake this task. Mr Rathner was chosen for two reasons: first, largely due to his capabilities, and secondly because Mr Saltzman became unwell during this period and was unable to continue;[117]

(h) he disagreed that Mr Rathner was retained to undertake a very thorough review of what had happened in the partnership from "day one";[118]

(i) when taken to his letter to Mr Black dated 6 February 2009 following the meeting between him and Mr and Mrs Furman on the one hand, and Mr Black and Mr and Mrs New on the other hand, he disagreed that this meeting and the subsequent correspondence represented the start of the discussions regarding the finalisation of the business relationship between the partners, and there being a final settlement in respect of the partnership activities;[119]

(j) he agreed that he knew from April 2009 that GST refunds in respect to the Mordialloc project had been deposited into the LHND bank account and offset against the LHND loan account with the partnership;[120] and

(k) when taken to the correspondence between him and Green & Sternfeld in August 2009 at around the time of Mr Rathner's appointment, he agreed that the correspondence indicated that what was contemplated was that an examination and reconstruction of the partnership would be undertaken, not just a review of the construction costs.[121]

166 The conclusions that can be derived from Mr Rathner's evidence, and to a lesser extent, from Mr Saltzman's evidence are as follows:

(a) despite both Mr Rathner and Mr Saltzman being very loath to concede that Mr Rathner had undertaken a thorough and comprehensive review of the financial affairs of the partnership, it was apparent that this was what was contemplated at the time of Mr Rathner's retainer;

(b) despite some suggestions by witnesses for MYR that a significant reason why Mr Rathner became involved was because of Mr Saltzman's illness, Mr Saltzman did not become ill until September 2010. Accordingly, Mr Rathner's forensic accounting experience must have been the reason for his retainer;

(c) neither Mr Rathner nor Mr Saltzman were able to identify anything that was not done during the course of the Rathner review such that it couldn't be described as being thorough and comprehensive;

(d) despite there being references in correspondence and affidavits from 2011 to information not having been provided by Green & Sternfeld, that was either demonstrated to be incorrect, or the nature and character of the missing information was not identified by either Mr Rathner or Mr Saltzman;

(e) despite almost all of the correspondence and discussions being between Mr Lebovits and Mr Rathner, all negotiations between them regarding the accounts, including adjustments to the accounts, were carried out upon the instructions of Mr Furman and Mr New;

(f) Mr Furman in particular was involved in the process, in reviewing material provided by Green & Sternfeld to Mr Rathner, reviewing material prepared by Mr Rathner on his behalf, and providing instructions to Mr Rathner; and

(h) no credible explanation was provided for the suggestion that at the time that Mr Furman signed the 2009 accounts that there were outstanding unresolved issues regarding those accounts.

167 Ms Martha Pham, a bookkeeper employed by Mr Furman between 2006 and 2010, swore an affidavit on 17 April 2013. She deposed that she predominantly dealt with Mr Black of Green & Sternfeld in relation to bookkeeping and accounting issues for Furman Constructions and MYR's involvement in the partnership. Her tasks included preparing invoices for construction costs and GST refunds. When she commenced her job in May 2006, Mr Furman told her she should follow the "advices" of Green & Sternfeld with regard to any bookkeeping issues in respect of the partnership and Furman Constructions. She did not consult Mr Saltzman about these issues.

168 Ms Pham deposed that as part of her role she would complete the BAS returns for Furman Constructions, and the ATO would deposit all GST refunds to the Bank account of Furman Constructions. On or about 17 July 2006, Mr Black attended her office and told her that all GST refunds otherwise due to Furman Constructions were to be paid by the ATO to the partnership bank account. On 24 July 2006 she sent a handwritten fax to Mr Black in the following terms:

I just need to confirm again as same as last notice I've written to you.

Furman Const. BAS is still being lodge as normal GST returns and claims expenses on behalf of the L & H Dev accounts that are being paid.

We have now advise ATO of the GST monies refunded be forwarded to L & H Dev accounts as per instruction by Moshe.

I never spoke to Moshe Furman about Doug Black's request because of his earlier instructions to do whatever was requested by the Partnership's Accountants, Green & Sternfeld.

When I wrote in the fax "We have now advise ATO of the GST monies refunded be forwarded to L & H New Accounts as per instruction by Moshe" by that I mean I was confirming with Doug Black that I had advised the ATO that GST refunds that were otherwise due to Furman Constructions should be payable to the plaintiff, and that pursuant to Doug Black's advises I confirmed that it was upon the instructions of Moshe Furman, which it in fact was not. The reference to Moshe Furman was required by Doug Black to give authority to the letter I had prepared on behalf of Furman Constructions.

169 Ms Pham's oral evidence in relation to the matters deposed to in her affidavit was not particularly illuminating. She corrected the statement that Mr Black had advised her that the GST refunds should be paid into the partnership bank account; rather, Mr Black had told her that the GST refunds were to be paid to the LHND bank account.[122] Under crossexamination, she referred to Mr Black going to her office and asking her to prepare an invoice to LHND so that "he could claim the GST",[123] notwithstanding that she made no reference to an invoice in her affidavit. When taken to her fax of 24 July 2006, she could not recall the "last notice" referred to in the first paragraph of her fax.[124] She was confused about whether Mr Black told her what to write in this fax or any other letter.[125] She could not recall whether she had advised the ATO of the change in the destination for the GST refunds, but assumed she must have.[126] She confirmed her evidence that she did not discuss the matter with Mr Furman. In response to the question as to what Mr Black's "advices" to her on 17 May 2006, she said:[127]

Well, he advised me to do the invoice as I've done and write a fax and basically confirm that I've done what I need to do.

170 Generally, notwithstanding some of the inconsistencies in the evidence of Messrs Saltzman and Rathner, I found that all of the professional witnesses, from both camps, with the possible exception of Ms Pham, were reasonably reliable historians. However, in the end, the most useful evidence, as is usually the case, is to be found in the contemporaneous documents. In considering the question of whether MYR is bound by the 2009 accounts, the correspondence between Lowe Lippman and Green & Sternfeld in the periods between August 2009 and December 2010 is of particular relevance, along with meeting notes prepared by the parties' advisers and the various drafts of the accounts themselves.

171 It is apparent from a review of the contemporaneous correspondence and other documents that, contrary to the assertions made in the affidavits and submissions relied upon by MYR:

(a) by June 2009 at the latest, Mr New and Mr Furman had agreed that in order to finalise the affairs of the partnership, a thorough review of the financial affairs of the partnership would be undertaken;

(b) in order to achieve this task, Green & Sternfeld, as the partnership accountants, would supply extensive information to Lowe Lippman;

(c) during the course of subsequent correspondence between Mr Saltzman and Mr Lebovits, Lowe Lippman raised a number of queries and concerns regarding the partnership accounts, including issues which continue to be agitated on behalf of Mr Furman's interests today;

(d) by the end of August 2009, Mr Rathner commenced his review of the partnership accounts in place of Mr Saltzman, by reason of his particular forensic accounting expertise. I do not accept that Mr Rathner's engagement was as a result of Mr Saltzman's unavailability owing to illness, as the evidence is that Mr Saltzman was ill in the latter part of 2010;

(e) Mr Rathner's review of the partnership's affairs was comprehensive, broad-ranging, and thorough, and was not confined to verifying the construction costs incurred for each of the projects, including not only the "agreed" partnership projects, but also the Charman Road and Poath Road projects;

(f) during the course of the review, Mr Rathner sought extensive and detailed financial information from Green & Sternfeld, including primary records such as bank statements and facility documents and provided detailed information to Green & Sternfeld regarding the construction costs of each project in order to determine the net amount owed to Furman Constructions in respect of those construction costs;

(g) contrary to the affidavits and submissions relied upon by MYR, Green & Sternfeld cooperated fully with Mr Rathner in the course of his review. In contrast, Mr Furman was less forthcoming in providing requested information to Green & Sternfeld, although it appears he did so in the end;

(h) during the course of the Rathner review, Mr Rathner queried a number of items in the accounts, which were explained or verified by Green & Sternfeld, or conceded as being wrongly described or attributed. Mr Rathner, on behalf of Furman Constructions made a number of claims, in particular for underpayments for construction expenses. In turn, Green & Sternfeld challenged some items claimed by Furman Constructions as construction expenses, some of which were explained and verified, some of which were reclassified as partnership expenses, and some of which were not pressed, or conceded. By way of example, in their letters dated 17 April 2009, 29 April 2009, 4 May 2009, 24 August 2009, 28 August 2009, and 29 September 2009, Green & Sternfeld made reference to GST refunds collected and banked by Furman Constructions of approximately $225,000 which was properly payable to the partnership. Also, on various occasions Green & Sternfeld pressed Mr Rathner to seek verification from Mr Furman regarding construction expenses said to have been paid by Furman Construction in cash;

(i) the mechanism by which the various claims and cross-claims were agreed and recorded was by making adjustments to the loan balances in the 2009 accounts, successive drafts of which were provided by Green & Sternfeld to Mr Rathner;

(j) Mr Rathner kept Mr Furman fully informed regarding the course of his review, including providing him with verbal reports and copies of correspondence, and always acted upon Mr Furman's express instructions;

(k) Mr Rathner did not arrange for Mr Furman to sign the 2009 accounts until he and Mr Saltzman were satisfied with their accuracy, and in particular, the accuracy of the balances of the partners' and Furman Constructions' loan accounts;

(l) Mr Furman's signing of the 2009 accounts represented the culmination of a long, protracted, and exhaustive process of investigation, verification, and negotiation; and

(m) the allegations made by or on behalf of the Furman interests regarding alleged inaccuracies in the accounts of the partnership and the inadequacy of the information provided by Green & Sternfeld from 2011 to the current day are disingenuous at best.

172 The following summary of the correspondence between the parties over the course of 2009 and 2010 supports and illustrates my conclusions as set out above. The process commenced in February 2009, when Mr Saltzman wrote to Mr Black, as follows:

I write to you in relation to the affairs of the above, and specifically refer to the meeting held at our office Monday 2 February 2009, attended by yourself, Leibel and Channa New, Moshe Furman and myself.

The purpose of the meeting was to discuss openly, the arrangements between the parties, in respect to the joint venture and partnership, and more specifically in relation to the financial accounting, and income tax affairs since inception.

We discussed a number of matters in the meeting and in summary form I now provide to you the following, and look forward to receiving the requested set of information.

1. Full copies of the financial statements and income tax returns for the Partnership of L & H New Developments Pty Ltd and MYR Investments Pty Ltd, for the financial years ended 30 June 2004, 2005, 2006, 2007, and 2008.

I look forward to receiving as part of the financial statements set, the Trading Account, Detailed Profit & Loss Statement, Balance Sheet as at 30 June, and accompanying notes and schedules to be read in conjunction with the set of financial statements.

1. Copies of the Business Activity Statements in respect to each quarter, over the period from the year ended 30 June 2004 to 31 December 2008.
2. It is understood by me, that L & H New Developments Pty Ltd established lines of finance and credit facilities in respect to the acquisition and construction of the various projects.

In this regard, I look forward to receiving from you copies of the following.

• Facility Agreements/Facility Letters of Approval for Finance, together with detailed Schedules providing the break down of the facilities project by project.
• Copies of the Bank Statements and Commercial Bill Rollover Statements, and Construction Finance Sheets for each project.

1. A copy of the detailed Profit & Loss Statement prepared in respect to each project, on a project-by-project basis, detailing income, expenses and profit.

It would be helpful to receive advice from you in relation to the appropriation and distribution of the profit, if in fact it was otherwise than in accordance with the understanding on a 50/50 basis.

1. Understanding that L & H New Developments Pty Ltd was the company dealing with the Bank of Melbourne, and the Westpac Banking Corporation in relation to the facility, that there was the on provision of finance to the Partnership.

I would appreciate copies of the Schedules for the calculation of interest charged, and loan amounts paid across to and from the Partnership in the books of L & H New Developments Pty Ltd.

This will permit us to review and cross-reference to the Partnership in respect to finance provided and charged for by L & H New Developments Pty Ltd.

1. A copy of the worksheets in your files in relation to the derivation of profits, and the application of funds from settlements of the properties for 121 and 200 Charman Road, Poath Road, and Takapuna Street.
2. Please provide a copy of the Schedule prepared, detailing the capital provided by Leibel New, on a project-by-project basis, separate to facilities provide (sic) by the Westpac Banking Corporation.
3. A copy of the Business Activity Statements for the periods will disclose GST refunds.

Please itemise the quantum of the refunds in respect to the periods, and to where the funds had been banked.

1. It is understood and respected, that for Takapuna Street and the McDonald Street projects, that Bank funding was used as an internal invoicing arrangement by Furman Constructions to the Partnership together with a Progress Payment drawing facility.

In addition, please advise as to the repayment of GST funds in respect to those invoices that had been drawn by Furman Constructions (Vic) Pty Ltd.

1. In respect to the profits derived and arising from settlement of the properties at 121 and 200 Charman Road, Cheltenham, of the order of approximately $900,000 (our understanding), why the funds were not put into an interest bearing account. Your advice is sought.

As you will appreciate and as has been explained, most of the information that has been provided in respect to the Partnership has been provided to us largely more recently.

With the projects coming to a close, and in terms of reaching a settlement for the division of the final settlement proceeds in respect to the parties to the Partnership, it is requested that you assist us please, in assisting our client with an understanding of the income, expense, profit distribution, asset and liability position of the Partnership.

Your earliest attention to the provision of the above documentation would be appreciated.

In the meantime, should you have any queries in relation to the above, pleased do not hesitate to contact me or Caroline Arman of this office.

173 The first formal response to this letter was from Doug Black on 17 April 2009.[128] This was a fairly brief response, and also requested further information from Furman Constructions regarding construction costs for the Poath Road and Mordialloc developments. A further response was provided by Mr Lebovits on 22 April 2009, mainly summarising what information had been provided by Green & Sternfeld to Lowe Lippman.

174 Mr Saltzman wrote to Mr Lebovits again on 28 April 2009. Among other things, the letter referred to payment of the GST credits claimed by the partnership in respect of the Caulfield South property to LHND. Mr Saltzman wrote:

No consent from [MYR] was provided for the appropriation of the GST credits and these were directed to the benefit of [LHND] as the partner entity.

We have instructions to demand that these amounts be repaid to the partnership bank account within 7 days.

Failing which, we advise that the matter will be reviewed further for appropriate action.

175 Further on, following further comments regarding GST and the Westpac bill facilities, Mr Saltzman stated as follows:

In respect to the capital accounts of the respective Partners to the Partnership, in particular for [LHND], what we are seeking is a schedule in relation to the amounts of capital contributed (separate to the commercial bill finance arrangements) to establish on a financial year to financial year basis, and in respect to a project by project basis the capital account of [LHND] from inception to the conclusion of the Partnership.

It is requested that your taking over of the file, and a full review thereof, will allow you to ascertain the position in relation to all of the matters concerning the Partnership, with regard to Income, Expense, GST, Building and Supervision Fees, Interest on Finance Facilities, and Profit Determination, to then work through with Mark Saltzman of this office.

Now that the projects have been completed, and in respect to the current financial year, the Partnership's affairs are being terminated, an investigation is being made in relation to the affairs of the partnership with regard to GST and the Business Activity Statements, the financial accounts, Balance Sheets and Income Tax Returns so that a fair and equitable reconciliation can be made and the Partnership's affairs brought to an end.

177 The statement above makes it abundantly clear that the purpose of the communication between Green & Sternfeld and Lowe Lippman in the forthcoming months was to undertake a comprehensive and broad ranging review of the affairs of the partnership.

178 On 29 April 2009, Mr Lebovits wrote to Mr Saltzman responding to a specific query regarding the Charman Road and Poath Road projects. He enclosed "project statement summaries" for both projects, and confirmed that MYR's profit share in relation to both projects of $430,653 was recorded in the books of LHND as a loan owing to MYR, and that the actual funds had been used as working capital on the subsequent projects. The letter also repeated earlier requests for information to be provided by Furman Constructions.

179 Mr Lebovits provided a more fulsome response to Mr Saltzman's letter of 28 April 2009 on 4 May 2009. In this letter, Mr Lebovits:

(a) disagreed with Mr Saltzman's contention that GST credits of $423, 363.65 had been used to pay LHND: rather, approximately $330,000 had been used by LHND to meet the interest payments for the Westpac bill facilities;

(b) if LHND agreed to have the GST refunds paid to the partnership account LHND would demand an equivalent amount to repay advances made by it to the partnership;

(c) he noted that GST credits claimed by Furman Constructions in respect of payments made by the partnership to contractors had not been refunded to the partnership;

(d) the partners made no capital contribution to the partnership, with all funds having been advanced by LHND and the bank;

(e) confirmed that the profit share of Furman Constructions in respect of the Charman Road and Poath Road projects was reflected as a loan in the books of LHND, but this could be reflected in the partnership accounts; and

(f) given that the partnership now had substantial cash reserves, these could be applied to repaying part of LHND's advances of $2,397,937, following which LHND would have funds available to repay Furman Constructions.

180 There was no further substantive correspondence until 18 August 2009, when Mr Saltzman wrote to Mr Lebovits in the following terms:

We write to you in relation to the Partnership's financial affairs.

We refer to my recent telephone discussions with you, and earlier correspondence in relation to the Partnership's financial statements in particular the Balance Sheet and the Partner's Loan Accounts, Capital Accounts, and the amounts outstanding.

As at 30 June 2008, the most recent Balance Sheet available, it discloses that L & H New Developments Pty Ltd has outstanding to is $2,423,110.31.

With the projects now having been completed and the state of the Partner's Capital and Loan Accounts as at 30 June 2009 to be finalised, it is imperative please, that we obtain in order to pass onto Mr Furman, a full historical recording and reconciliation of the Capital and Loan Accounts with L & H New Developments Pty Ltd and MYR Investments Pty Ltd since inception disclosing capital contributed and/or lent to the Partnership, repayments of capital, accreditation with income distributions and drawings so that there is a clear understanding of the position.

MYR Investments Pty Ltd is currently looking to make a draw down in respect to its entitlement on account of its current business activities.

Please provide us with the information in relation to the construction of the Partner's Capital Accounts and Loan Accounts, from inception of the Partnership to 30 June 2009, as a matter of urgency.

The signature clause on this letter indicates a copy was provided to Mr Furman and on 20 August 2009 a copy was also sent to Mr New. In his covering letter, Mr Saltzman told Mr New the following:

As explained, time is of the essence now from Moshe's perspective, in relation to the affairs of MYR Investments Pty Ltd, wishing to move ahead with regard to its business activities and that there should be a draw down of the Loan Account with MYR Investments Pty Ltd.

Of course, it is important to establish the exact position of the Loan Account with L & New Developments Pty Ltd, as recorded as being outstanding to it of $2,423,110.31, as at 30 June 2008. In order to establish the correctness, or otherwise, of the Loan Account, I have requested from Robert a detailed history in relation to the recordings from inception of the Partnership, with regard to capital contributed and/or funds lent to the Partnership, repayments of Capital accretion to the Loan Account with regard to income distributions from the Partnership and the drawing of funds in respect to payments.

181 On 24 August 2009, Mr Lebovits wrote to Mr Saltzman complaining that Furman Constructions had not provided Green & Sternfeld with information requested by them in previous correspondence and necessary to complete BAS returns for the partnership. This letter also enclosed a draft of the 2009 accounts, and a statement providing "a full historical record" of Loan-Accounts (sic) made by LHND to the Partnership." He confirmed that the monies owed to Furman Constructions on account of its share of the profits of the Charman Road and Poath Road developments had now been recorded in the books of the partnership.

182 Mr Saltzman responded that day by email acknowledging receipt of the information, and stated:

I have sent a copy of all of it through to [Mr Furman] for his attention and review.

183 On 25 August 2009, Mr Furman sent a letter to Mr Saltzman, copied to Mr Lebovits, which indicated where the information sought by Green & Sternfeld could be located, and requested that the following issues be addressed by Mr Lebovits:

1. Settlement monies and allocations on the balance after sales on each individual Projects, none of these monies had gone to the joint account of L & H Developments Pty Ltd and MYR Investments Pty Ltd, but all these had gone into L New banking account. We need records on all the movements of funds on where it has been deposited and how had been treated in the partnerships accounts.
2. we need the allocations and records of all the provisions for interest on the Funds provided by the bank during each projects.
3. The above information required to establish the correct appropriations and amount claimed on the loan accounts.

184 On the same day, Mr Furman wrote to Mr Lebovits regarding how he considered GST refunds to the partnership should be applied, following which he would render the tax invoices requested by Green & Sternfeld.

185 On 28 August 2009, Mr Lebovits wrote to Mr Furman stating, among other things:

(a) no GST refunds were due to the partnership, instead, the partnership had GST liabilities of $496,768.00;

(b) invoices should be issued by Furman Constructions without conditions;

(c) any GST liabilities incurred by Furman Constructions were its responsibility; and

(d) Furman Constructions had received approximately $225,000 in GST refunds which should have been paid to the partnership.

186 On 31 August 2009, Mr Saltzman wrote a letter to Mr Lebovits (copied to Mr Furman). Given its significance (and the announcement of Mr Rathner's retainer) the contents are reproduced in full below:

We refer to your letter 24 August 2009 in relation to the Partnership's financial statements.

We confirm that we provided your correspondence, together with the attachments to our client Mr Moshe Furman for his attention.

Approximately 1 year ago, when Doug visited the home of Yvonne & Moshe Furman, they requested directly from him, proof documentation in relation to the numbers that were appearing in the financial statements. This information has not been received.

Further, early in 2009, in discussions with Leibel & Hannah New, again in relation to the credibility of the numbers appearing in the financial statements, Hannah asserted that it would be 1 week to 10 days in order for you to gain an appreciation for what had occurred, and the recordings of it. No new documentation has been supplied.

Accordingly, it is now requested that the Pay-In Books, Cheque Books, Bank Statements and the associated source documentation pertaining to the Partnership of L & H New Developments Pty Ltd & MYR Investments Pty Ltd, be made available to our office as soon as possible, to undertake an examination and reconstruction of the financial statements form the Partnership's inception to its current date.

It has been requested that Gideon Rathner, Lowe Lippman's Partner in Insolvency and Corporate Reconstruction be provided with this assignment for the provision of his findings, in order to reconstruct project by project, and for the funds received and paid out.

In particular of concern (sic), is the position of the Loan Accounts and Partner's Capital Accounts of the Partnership.

Please provide us with the books, records, information and source documentation in order to have the examination and reconstruction undertaken.

Should you have any queries in relation to the above, please do not hesitate to call Mark Saltzman of our office.

187 The description of the scope of the tasks to be undertaken by Mr Rathner, the nature of the information sought, and the reference to "the position of the Loan Accounts and Partner's Capital Accounts of the Partnership" being of particular concern indicates that the assertion that Mr Rathner's retainer was limited to a review of the construction costs for each of the projects is somewhat absurd. In any event, Mr Furman, as the principal of the builder for each of the projects, was in full control of the information regarding the construction costs, and would not have needed Green & Sternfeld's assistance in that regard. Accordingly, the information sought by Lowe Lippman must have related to the other financial aspects of the partnership.

188 The Lowe Lippman correspondence file indicates that Mr Saltzman briefed Mr Rathner regarding his new assignment on or about 1 September 2009. The Lowe Lippman file includes a file note of telephone conversations on 1 September 2009 between Mr Rathner and Mr Furman, and, later that morning, Mr Rathner and Mr Lebovits. The file note records that Mr Furman told him that Mr New funded the projects, but had been repaid, and there had been no proper accounting of the profits, and the loan accounts. Mr Furman told Mr Rathner that Furman Constructions was the builder for the projects, and that the partnership commenced in about 2003. The file note then enumerated each of the projects, including the Charman Road and Poath Road projects.

189 Mr Rathner's file note of the telephone conversation between him and Mr Lebovits records that Mr Black would call Mr Rathner later that week, and all records would be provided. Mr Lebovits told Mr Rathner that no interest had been paid to Mr New on the sums advanced by him to the partnership, and Mr Lebovits undertook to provide all source documents to Mr Rathner.

190 On 29 September 2009, Mr Lebovits wrote to Mr Rathner enclosing schedules for the LHND loan account in the partnership accounts, and details of how the proceeds of sale for the Mordialloc and Caulfield South properties were disbursed. The letter also addressed specific queries Mr Rathner had raised with respect to:

(b) the banking of GST refunds in the LHND account in reduction of LHND's loan account balance;

(c) GST refunds said to be owing by Furman Constructions to the partnership; and

(d) any reference to "interest" in the accounts being in relation to borrowings under the Westpac bill facilities alone, and not funds advanced by LHND.

191 On 13 October 2009, Mr Rathner wrote to Mr Lebovits, stating, among other things:

I refer to our numerous discussions and meetings concerning the loan accounts arising out of the joint ventures between the above parties. I thank you for your co-operation which has greatly assisted me in my review,"

...

I am presently undertaking a verification of the GST, interest and receipts of the bill drawdown as recorded in the loan account for [LHND] in the partnership records. Should I have any questions I will revert to you further.

I confirm that I have requested that Moshe Furman provide copies of the following documents as requested by you.

192 Further details of the tasks being undertaken by Mr Rathner are referred to in his letter to Mr Lebovits of 23 October 2009. After referring to schedules he was in the course of preparing in relation to the construction costs (including details of GST paid and recovered) in respect of the partnership projects, Mr Rathner stated:

The following matters are still being verified by me:

• Verify the interest paid to the Bank. Is the interest as per the New Loan account?
• Verify the interest paid by project.
• Verify the receipts/drawdown of the bills to the partnership bank account.
• Verify the GST refunds due to the partnership and to trace those refunds to the partnership bank accounts and the New Loan account.
• Verify the interest paid to the Bank and dispersed on Poath Road.

To assist me to undertake this verification exercise would you please forward to me all of the bank statements for the partnership including the Maxi Account and the Partnership cheque account.

....

I note from the draft accounts for 30 June 2009 at Note 7 that it reflects drawings by each of the partners of $206,676.69. would you please provide to me details of when those payments were made to the M and Y Furman Family Trust.

The information requested was provided by Mr Lebovits to Mr Rathner on 6 November 2009.

193 On 5 November 2009, Mr Lebovits responded to the queries in Mr Rathner's letter of 13 October 2009 regarding the accounting for the profits on the Poath Road and Charman Road developments, and Mr Furman's claim for a 10% fee (on construction costs) in respect of project management services for these three projects.

194 On 16 November 2009, Mr Rathner wrote to Mr Lebovits enclosing various documents, including

A schedule relating to the amount owing to Furman Group Pty Ltd for the Charman Road developments.

Copies of the Joint Venture Agreement for the Charman Road developments.

Summary of Construction Costs for Poath, Hastings, Hewish, Takapuna and McDonald.

A schedule detailing the GST refunds received for each of Hastings, Hewish, Takapuna and McDonald projects.

Copies of invoices raised by Furman Constructions Pty Ltd to L & H Developments Pty Ltd for Takapuna and McDonald projects.

Based upon the information available to me, it appears that the following amounts are owed to Furman Group:

The attached invoices from Furman Constructions Pty Ltd to L & H Developments Pty Ltd totals $4,651,180. Would you please advise into which bank account the GST refunds of $422,834.55 were deposited.

Furman Constructions Pty Ltd has paid GST on these invoices but has not received the GST refunds. The non-receipt of GST refunds accounts for the majority of the shortfall of funding received by the builder.

...

I refer to your letter dated 6 November 2009. At Point 2 you enclose copies of the bank statements for the Maxi-Direct Bank Account for the period 14 May 2008 to 30 June 2009. Would you please provide me with copies of all the bank statements for the period prior to 14 May 2008.

195 On 23 November 2009, Mr Lebovits responded to the above letter, as follows:

(a) conceding that the Charman Road joint venture agreements provided for a five per cent management fee (calculated on the construction costs of the projects) to be paid to Furman Constructions;

(b) commenting upon the summary of construction costs and payments on a project by project basis; and

(c) he confirmed that there was GST refunded to the partnership, which was paid to LHND and LHND's loan account balance reduced accordingly.

196 On 24 November 2009, in a letter to Mr Lebovits, Mr Rathner raised a new issue with respect to Furman Constructions entitlements, as set out below:

I enclose a schedule prepared by the Quantity Surveyor scheduling out each progress valuation prepared for the following developments:

I also enclose a schedule prepared by Mr Furman totalling the progress claims verified by the Quantity Surveyor of $7,070,224.51.

According to Mr Furman's records he can identify receipt of these progress claims of $6,359,990.00

Would you please review the partnership records to confirm receipt by the partnership of the amount of $7,070,224.51 and also confirm the payments advanced by the partnership to Furman Construction Pty Ltd in payment of the Quantity Surveyor reports.

To the extent that there is any shortfall between monies received from the bank based upon the Quantity Surveyor reports and the monies paid to Furman Constructions Pty Ltd, that the difference is an amount due to Furman Constructions Pty Ltd.

It is Mr Furman's understanding that the full amount of any drawdown of bank funding against the Quantity Surveyor certification must be paid without deduction or variation to the builder.

197 On 29 November 2009, Mr Rathner sent a further letter to Mr Lebovits referring to a listing of payments he had previously provided, including payments from the Partnership bank account, and stated as follows:

As a result of that review, Mr Furman has identified a number of payments made out of that account to which he has received details as to the nature of the payment. I enclose a list of those payments and request that you provide a description against each payment and where appropriate, further explanation as to that payment.

198 On 8 December 2009, Mr Lebovits responded to the new issue raised in Mr Rathner's letter of 24 November 2009, as follows:

We refer to your letter dated 24 November 2009 and acknowledge that part of the funding from Westpac was to provide a Quantity Surveyor's Report in order to draw down funds. The partnership had no agreement to provide these funds direct to the builder.

The suppliers and contractors for the Hastings and Croydon projects were paid direct from the partnership bank account and thus did not affect any cash requirements for Furman Constructions Pty Ltd (Furman). As previously discussed Furman claimed back the GST on these projects but this was never refunded to the partnership. We again emphasise that the monies were never paid out by Furman however all the invoices were in the name of Furman. At no time was there a shortfall due to Furman.

With respect to the McDonald Street project the modus operandi changes as the directors of L & H New Developments Pty Ltd were not satisfied with the current arrangement for the partnership to continue to pay all the suppliers and contractors and not be reimbursed for the GST. It was therefore agreed by the parties that tax invoices be issued by Furman to the partnership for progress claims. The net funding received from Westpac after payment of interest totalled $3,929,723.00 and we note that according to Schedule F of our previous correspondence, $4,728,000.00 plus Management Fee of $460,000.00 was paid to Furman. Please note that yet again there was no shortfall due to Furman. In fact we question the reason for such a large variance in the Quantity Surveyor's cost and the amount paid to Furman.

199 Also on that date, Mr Lebovits responded to Mr Rathner's letter of 30 September 2009, as follows:

We refer to your letter of 30 November 2009 together with a schedule of payments attached.

We point out that all the information you request is readily available from the cash books we have provided to you. We are very conscious of the fact that your enquiries are very time consuming resulting in costs escalating to the partnership.

However, should you experience any difficulties after examining our cash books we would be pleased to provide you with a full schedule highlighting your queries.

200 On 21 December 2009, Mr Rathner responded, expressly on behalf of Mr Furman, to Mr Lebovits' queries in relation to specific payments and specific progress in his letter of 23 November 2009, and enclosed a number of documents regarding construction costs, GST refunds, and unreconciled payments. He stated as follows:

As a general comment, in our opinion, the reason for the confusion now between the parties relates to the Westpac funding being paid to an account of Mr New or his entity L & H New Developments Pty Ltd and not being received directly into an account in the name of the partnership. Had all monies relating to the partnership been paid into and paid out of a partnership account, then in our opinion many of the issues now being reviewed would not have arisen.

201 It is clear from the above statement that Mr Rathner was well aware of the manner in which the funds from Westpac were dealt with, and was actively investigating the relevant transactions. Mr Rathner's letter concluded as follows:

The amount now claimed by Furman Constructions Pty Ltd as set out in the Summary of Constructions by Project is $571,486.60.

202 On 25 January 2010, Mr Lebovits responded to the matters raised in Mr Rathner's letter of 21 December 2009 on a project by project basis, and raised his own queries in relation to the detailed schedules prepared by Mr Rathner. In particular, Mr Lebovits queried the classification of certain items as construction costs rather than partnership expenses, the accuracy of amounts said to have been received by Furman Constructions from the proceeds of sale of various properties, and discrepancies between the items identified by Mr Rathner and the information supplied to Mr Rathner by Green & Sternfeld. Also, on 25 January 2009, Mr Lebovits provided under separate cover, a complete set of correspondence regarding the Westpac bill facilities, along with Green & Sternfeld's summaries and reconciliation in order to enable Mr Rathner to "more easily analyse the interest commitments of the Partnership".

203 On 1 February 2010, Mr Rathner wrote to Mr Lebovits referring to the correspondence of 21 December 2009 and 25 January 2010 and stated:

Mr Furman is presently reviewing your reply and we will forward a further response in due course.

204 Mr Rathner also requested a response in relation to his queries regarding the unreconciled items identified from the Westpac bank statements. A schedule of payments (said to have already been provided on 25 January 2010) was forwarded to Mr Rathner by Mr Black the following day.

205 On 12 February 2010, Mr Rathner wrote to Mr Lebovits regarding the proposed renewal of the Westpac bill facility. He stated:

Prior to Mr Furman executing the Business Finance Agreement on behalf of MYR Investments Pty Ltd as guarantor of the loan, Mr Furman would appreciate a detailed reconciliation of the amount of the debt of $2,230,000.

Mr Rathner referred to a discrepancy of $110,655.18 between the amounts of the Westpac advance and the funds required to purchase and develop the Hastings property.

Mr Furman is still reviewing your schedule and until the advance from Westpac of $2,230,000 can be reconciled Mr Furman is not in a position to guarantee the full advance from the Bank when he cannot account for the proceeds of the loan.

Following agreement to the receipt and disbursement of the loan of $2,230,000 for the benefit of the partnership, Mr Furman has confirmed he will then execute on behalf of MYR Investments Pty Ltd the Business Finance Agreement in the capacity as guarantor.

The import of the above letter was that until Mr Furman was satisfied that the funds advanced by Westpac to LHND under the bill facilities had been expended for the purpose of the partnership, he was not prepared to execute the documents required to meet the funding requirements of the partnership. It appears from the Westpac bill facility documentation annexed to Mr Saltzman's affidavit of 30 January 2013[129] that both Mr New and Mr Furman executed these documents on 21 February 2011.

207 On 17 February 2010, Mr Rathner wrote a further letter to Mr Lebovits noting that all of the Westpac bill facility statements were in the name of LHND, and the interest and fees were paid from a non-partnership account. He requested that Green & Sternfeld prepare a schedule identifying the interest paid from the partnership account, whether the interest had been paid to LHND or Westpac directly, and to identify which project the payment could be attributed to. Further, he requested that some missing statements be provided to him.

208 On 18 February 2010, Mr Furman sent a fax to Mr Black asking for details of five cheques issued between September 2009 and January 2010.

209 On 19 February 2010, Mr Rathner provided his substantive response to Mr Lebovits' letter of 25 January 2010 ("Rathner report"). The Rathner report provided detailed, project by project comments upon the earlier letter, and put forward various contentions regarding the proper characterisation of various payments and queries what he said were errors in Green & Sternfeld's accounting.

With regard to all of the cash payments, Mr Furman proposes that if you wish to maintain a dispute in relation to the cash payment as construction costs, then a quantity surveyor report be relied upon for each project and the parties must agree that for each project, the quantity surveyor's report will be accepted on the costs of construction. Such instructions would include the builder's margin.

Accordingly, what was proposed that was if Green & Sternfeld (and by implication, LHND) continued to press Furman Constructions Pty Ltd to verify the cash payments paid by it and claimed from the partnership, that the parties agree to be bound by a quantity surveyor's report as to the cost of each project regardless of actual construction costs. The Rathner report also asked whether Green & Sternfeld was prepared to accept a 7% fee to manage the tenancies for the unsold units at the Mordialloc property.

Regarding the interest payments, this is subject to a separate reconciliation. We wrote to you on 17 February 2010 concerning our reconciliation of the interest and await your response. It will be necessary to reconcile the receipt of the monies from the Bank and the disbursement of the monies from the Bank to identify how much of the monies borrowed form the Bank included an allowance to cover the interest costs on the borrowings.

As an example, it is not uncommon with construction funding that the borrowing from a bank will include an amount as a provision to cover the interest for a period of time. The reconciliation will be necessary to identify how much of each borrowings was not used for construction and therefore was retained for the purpose of interest to ensure that interest has not been "accounted for twice".

212 On 25 February 2010, Mr Rathner wrote to Mr Lebovits stating that he had been requested by Mr Furman to confirm that the interest payments on the outstanding Westpac debt were up to date, and to follow up the request from Mr Furman regarding information concerning certain payments from a partnership bank account.

213 On 3 March 2010, Mr Lebovits wrote to Mr Rathner enclosing:

a detailed analysis of Commercial Bill drawdowns together with a complete analysis of all transactions in relation to the Hastings project through the [LHND] bank account

He also requested that Mr Furman provide details of the application of the rentals received from the Hastings properties.

214 The Lowe Lippman file includes a file note of a meeting held between Mr Rathner, Mr Lebovits and Mr Black on 11 March 2010. The file note shows that the following matters were discussed during this meeting:

(a) the need to substantiate a claim by Mr Furman that Furlap Constructions Pty Ltd was entitled to a 5% management fee for the Charman Road projects;

(b) the discrepancies between Mr Rathner's calculations of the profit share for the Charman Road developments and the amounts reflected in the loan accounts in the draft 2009 accounts. Mr Rathner calculated that Furman Constructions was still owed $45,917 in respect of one project, and $19,977 in respect of the other;

(c) a schedule of receipts of funding for the Poath Road and Hastings projects;

(d) whether there was any supporting documentation for an amount of $34,185 said to have been payable as an open space contribution in respect of the Poath Road project;

(e) whether the deposit paid by Mr Furman for the Hastings project had been reimbursed by the partnership;

(f) there were "no issues" with respect to the Croydon and Caulfield South projects;

(g) there was a query as to why the construction costs for the Mordialloc project were $1.3 million greater than that estimated by the quantity surveyor, but otherwise Mr Black was comfortable with the summary of construction costs included in the Rathner report;

(h) Mr Rathner was to cross-check the drawdowns on the Westpac bill facilities with the quantity surveyor's reports and payments;

(i) Mr Black agreed with the GST, except for Mordialloc;

(j) there was a need to adjust the accounts to remove a GST debit claim of $225,012;

(k) Mr Black was of the opinion that Mr Furman was entitled to approximately $300,000 (presumably this was with respect to underpayments to Furman Constructions on account of construction costs) subject to the verification of GST in respect of the Mordialloc project;

(l) the loan accounts in the draft 2009 accounts, in particular, that the amount said to be owing to Furman Constructions was said to be made up of the profit shares for the Poath Road and Charman Road properties; and

(m) the need to appoint an agent to manage unsold properties, and that bookkeeping fees would be a partnership expense, not a construction cost.

215 Mr Rathner's file note also annexed a printout of whiteboard notes made at this meeting. In addition to the matters referred to above, it is apparent from these notes that, in relation to the Mordialloc project:

(a) Green & Sternfeld were not satisfied with Mr Furman's accounting for GST, and they would forward a list of issues for Lowe Lippman to review;

(b) Green & Sternfeld queried the substantial difference between the construction costs estimated by the quantity surveyor and the actual costs of the Mordialloc project;

(c) Green & Sternfeld queried the substantial cash payment component of the construction costs of the Mordialloc project;

(d) comparing the quantity surveyors' reports with the actual construction costs calculated by Lowe Lippman with the amounts in the quantity surveyors' reports for the Hastings, Croydon and Mordialloc projects, the net difference (in favour of Furman Constructions) was $837,947; and

(e) Green & Sternfeld accepted the GST issues raised by Lowe Lippman, save for the Mordialloc project.

216 Mr Lebovits produced a file note of a telephone call between him and Mr Rathner on 26 March 2010.[130] The file note showed that Mr Rathner advised Mr Lebovits that:

(a) he had made substantial progress;

(b) he accepted bank bills and all allegations had been dropped; and

(c) Mr Rathner had made a call to Mr Furman. Mr Furman could not understand the bank bills even though Mr Rathner tried to explain it. Mr Rathner advised Mr Furman that he should sign (presumably the new Westpac bill facility) with Hastings and Croydon as security.

217 On 8 April 2010, Mr Rathner wrote to Mr Lebovits identifying two duplicate entries (totalling approximately $165,500) in the accounts and requesting that the project schedules and loan account balances be amended accordingly.

218 On 8 April 2010, Mr Lebovits wrote to Mr Rathner, as follows:

Reference is made to our telephone conversation of 26 March 2010.

I confirm that in principle, in relation to my client's claim regarding the outstanding principal loan balance that:

1. You accept the contents of the commercial bill documentation that I have recently provided to you;

2. Accordingly you accept that the loan balance owing by the above-mentioned Partnership to my client is in the region of $1,900,000.00 subject to final reconciliation.

I appreciate that there are a small number of other outstanding claims made by our respective clients (either against each other or the Partnership) which I look forward to continuing to discuss with you.

My client is desirous of these discussions shortly concluding after a mutually acceptance outcome is achieved in relation to these claims.

219 On 13 April 2010, Mr Rathner sent a letter to Mr Lebovits enclosing schedules listing out all of the Westpac bill facility statements for each of the properties apart from the Charman Road projects. He identified certain discrepancies between the interest amounts identified by him and the amounts identified by Green & Sternfeld. He stated as follows:

Would you please advise us whether we are missing any Commercial Bill Statements and provide us with copies otherwise it would appear to us that subject to reconciling the [Poath Road] project, the interest claimed exceeds the Commercial Bill Statements by $283,342.40.

220 The Lowe Lippman file includes a file note of a telephone conversation between Mr Rathner and Mr Lebovits, where Mr Lebovits told Mr Rathner he would respond to Mr Rathner's letters of 8 April 201 and 13 April 2010 "tomorrow". Mr Rathner told Mr Lebovits that he was unable to verify or confirm that the balance of the New loan account was $1.9 million until interest was resolved and the profits per project were agreed. For example, there was a $65,000 difference between Mr New and Mr Furman for the profits on the Charman Road projects. If there were to be any adjustments, this would reduce the New loan account. Any adjustments with respect to interest might also affect the New loan account.

221 On 3 May 2010, Mr Lebovits wrote to Mr Rathner enclosing numerous schedules regarding the various projects, explaining the variance in the interest figures calculated by the parties, confirming that the duplicate entries identified by Mr Rathner would not affect the accuracy of the partnership loan balances and profit and loss statements, and requesting copies of invoices rendered by Cyngler Kaye Levy to Furman Constructions claimed as a partnership expense.

222 In relation to the Mordialloc project, Mr Lebovits stated as follows:

We refer to your letter of 9 April 2010 wherein you enclosed a Quantity Surveyor's report undertaken in March 2010. Please confirm to us whether you intend to rely on this report together with the details of the summary you provided in your letter, in future negotiations with us.

223 On 12 May 2010, Mr Black sent copies of various invoices and bank statements to Mr Rathner and requested that further information and documents be provided to him by Mr Furman.

224 On 4 June 2010, Mr Rathner wrote to Mr Lebovits setting out, among other things, the claims by Furman Constructions and MYR in respect of construction costs and profit share. Mr Rathner also:

(a) sought evidence that the payment of $80,000 profit for the project at 121 Charman Road was in full and final satisfaction of Mr Furman's claim for profits from that project;

(b) queried two items in the accounts relating to the Poath Road project, totalling $59,842;

(c) noted there were differences in the schedules for the interest expense on the Westpac bill facilities prepared by Lowe Lippman and Green & Sternfeld; and

(d) provided schedules showing the estimated profit for each partnership project, and requested details of the selling expenses for the Mordialloc properties.

Mr Rathner's letter concluded with the following statement:

With regard to the draft Profit and Loss Statement for the year ended 30 June 2009, would you please provide a schedule substantiating the Rates and Taxes expense of $51,853.

Subject to adjustment for the reconciliation work undertaken which may affect the profit balance in the Profit and Loss Statement for 30 June 2009 and the Profit Distribution in the Partners Funds in the Balance Sheet, Furman Constructions and M & Y Furman Family Trust are entitled to the following amounts:

225 On 22 June 2010, Mr Lebovits wrote to Mr Furman suggesting that there be a meeting between himself, Mr Black, Mr Rathner, Mr and Mrs New, and Mr and Mrs Furman. He stated:

We understand from your recent conversation with Mr Louis New that you have only two remaining matters of concern.

We reiterate that Mr New looks forward to resolving all outstanding issues as a matter of urgency.

We are also in the process of finalising our review and have a number of concerns we wish to bring to your attention.

226 Notwithstanding the above, it appears that no such meeting occurred. Rather, it appears that what eventuated was the telephone conversation between Mr Lebovits and Mr Furman on 23 June 2010 referred to at paragraph 114 above, where Mr Furman ventilated a number of issues and concerns he had regarding the accounts.

227 On 12 July 2010, Mr Lebovits wrote to Mr Rathner, as follows:

We refer to your letter dated 19 February 2010 wherein you supplied us with a "Summary of Construction by Project" for the above named partnership. We have now completed our own review of each project to 30 June 2009 and have found this task most difficult due to date inconsistencies, incorrect amounts claimed for payments, and incorrect additions; hence we are unable to agree with any of your schedules.

We have provided you with our analysis of Poath Road under a separate cover letter dated 3 May 2010, to which we have received no reply. With respect to the balance of the projects, we have completed our review and provide you with our summaries of each project together with copies of our backup working papers. Furthermore, we now provide you with our overall summary of surplus payments made to Furman Constructions and amounts due to Furman Constructions.

Surplus/(Shortfall) due to Furman Constructions

As at 30 June 2009

Balance of monies owing to Furman Constructions

We ask that you refer to our notes in regard to major differences, and particularly we ask that you focus on an incorrect addition in the McDonald Road project exceeding $400,000.

Would you please contact the writer in order to arrange a suitable time to meet to discuss our analysis prior to organising a meeting with all stakeholders in order that we may finalise the Financial Statements for the year ending 30 June 2009.

228 The Lowe Lippman file includes a file note of a meeting held between Mr Rathner, Mr Lebovits, and Mr Black on 27 July 2010. While the file note is a little difficult to decipher, it appears that the parties went through the interest schedules and Furman Constructions' bank register for each project, including Poath Road, in some detail. The parties discussed the bank records in respect of the Poath Road project, the selling expenses for the Mordialloc project, and Green & Sternfeld's queries regarding approximately $210,000 of unsubstantiated cheque and cash payments in respect of the Mordialloc project. The file note made reference to Westpac seeking the 2009 accounts, an invoice from Cyngler Kaye Levy with respect to a VCAT proceeding concerning the Caulfield South property, Green & Sternfeld wishing to inspect all Furman Construction invoices referred to in the bank registers for each project, and what were referred to as "various minor issues".

229 Mr Lebovits' file note of this meeting[131] recorded that Mr Rathner had conducted a 100% verification of commercial bills for each of the partnership projects, including Poath Road. Mr Lebovits advised Mr Rathner that "audit technique" requires only a sample test. However, Mr Rathner advised him that Mr Furman had requested a 100% check because he did not trust the accounts were accurate as to the amounts owing to LHND. Mr Lebovits insisted that all outstanding queries still remaining with respect to commercial bills be sorted out prior to moving on to any other topic. The file note also included the following notes:

G&S supplied all source documentation listed as outstanding to GR.

Full explanation of all outstanding issues provided by G&S.

230 On 30 July 2010, Mr Rathner sent an email to Mr Lebovits requesting a further copy of the analysis and work papers for Poath Road, and stating that Mr Furman was finalising his review of the disputed construction costs for the Mordialloc project. Later that day, Mr Black emailed the Poath Road schedules to Mr Rathner. Mr Lebovits responded by email on 2 August 2010 seeking substantiation of certain expenses, including cash payments for landscaping works on the Mordialloc project. Mr Rathner responded to these queries in a letter on 3 August 2010.

231 On 20 August 2010, Mr Rathner sent an email to Mr Lebovits enclosing certain documents to verify Furman Construction's claims in relation to the construction costs, revising Furman Construction's claim in respect of underpayments down to $250,573 (compared with $508,925 as at 12 July 2010, and compared with Green & Sternfeld's position on the same date of $123,785).

The above does not include the claim to profit share on any project including Charman Road.

We will be able to verify the partners' loan accounts when updated draft financials are provided.

Furman Construction's claim was adjusted to $261,511 in an email from Mr Rathner to Mr Lebovits on 26 August 2010. The email concluded with the following:

We also confirm that the Westpac commercial bills and interest charge is not in issue.

233 On 2 September 2010, Mr Rathner spoke to Mr Lebovits by telephone. Mr Rathner's notes of the conversation include the following comments;

• accept cash
• agree Poath, Hastings, Hewish - as per email 26/8

The notes also referred to certain payments for the Caulfield South and Mordialloc properties which appeared to be still under discussion, although there is a note at the end which states:

The file note also makes reference to subsequent phone calls by Mr Rathner to Mr New and Mr Furman, the note in respect of the latter being "advised above".

234 On 16 September 2010, Mr Lebovits sent an email to Mr Rathner, as follows:

Amended Draft Financial Statements for the year ended 30 June 2009.

Copy of Journal entry adjustments taking into account all items agreed to as per our telephone discussions dated 2 August 2010 and 3 September 2010.

Copy of Trial Balance 01/07/08 to 30/06/09

Copy of General Ledger 01/07/08 to 30/06/09

Copy of Loan Account details re L & H New Developments Pty Ltd 01/07/08 to 30/06/09

Copy of Loan Account details re Furman Constructions Pty Ltd

Would you please analyse the attached documents and advise us as to whether Mr Furman is prepared to sign off on the Partner's Declaration.

Furthermore, should these Financial Statements be accepted as final, we would require the following:

Tax Invoice from Furman Constructions Pty Ltd for the additional construction costs

Credit note from Furman Constructions Pty Ltd re adjustment to Poath Road

Should you have any queries regarding the above matter, please contact me.

235 On 27 October 2010 at 9.27am, Mr Lebovits' assistant sent him an email stating:

Gideon would like you to give him a quick call to finalise New and Furman.

236 Mr Lebovits' record of the conversation was annotated on the hard copy of this email. The file note stated as follows:

1/ Furman agrees to $40,000 adjustment to Charman Road.

2/ The distribution of sales of properties to go in priority as follows:

a/ Bank commercial bill;

b/ payment of accounting fees;

c/ proportional repayment of loan accounts.

3/ Bank should not have imposed a penalty as they had too much security and in fact they released the security. Go to Ombudsman.

237 On 27 October 2010 at 10.10am, Mr Rathner sent an email to Mr Saltzman, as follows:

Mark

Finalised issues re Furman!

Final adjustment for Charman Road is $40,000 payment to Furman. This should be a reduction to New Loan a/c and corresponding increase Furman loan a/c.

G & S to finalise 2009 accounts. They will be forwarded to me to arrange Furman to sign. When received I will review with you.

Outstanding is resolution by G & S and Mr New of the interest charged by WBC. Excess interest charged $117k.

Relates to WBC seeking excess security which was rejected to Furman. Eventually WBC agreed with Furman and amended the documents. In the intervening period WDC charge penalty interest yet agreed to the securities position of Furman.

Sale proceeds from property sales to be

-1 bank debt

-2 G & S and LL accounting fees

-3 proportional payment of loan accounts.

I told Robert Lebovits to liaise with you re the 2010 accounts.

238 This email was presumably sent after a telephone conversation between Mr Rathner and Mr Lebovits, which is referred to in the following email sent by Mr Lebovits to Mr Rathner on 1 November 2010:

Reference is made to our telephone conversation last Wednesday 27 October 2010 wherein you advised the following:

Mr Furman has agreed to settle the Charman Road property dispute with an adjustment to the loan accounts of $40,000.

Mr Furman proposes that the distribution of the sale proceeds of properties sold be ranked in the following priority

The bank to be paid out in full;

Accountancy fees to be paid in full;

Proportional repayment of loan accounts.

The bank should not have imposed penalty as they had adequate security and in fact subsequently released the security.

In discussing the above with Mr New, we have been advised that he agrees with items 1,2a and 2b but does not agree with term 2c. Mr New feels that his loan account should first be qualified with Mr Furman's and then proceeds from sales should be applied equally.

Mr New further advises that although he has no objection to Mr Furman acquiring property at valuation (which is acceptable to both parties) in satisfaction of his loan account Mr New nevertheless feels that this should only be affected after everything else has been sold and settled.

With respect to item 3 above Mr New is seeking an appointment to discuss this matter with the regional manager of the bank. We shall keep you informed as to our progress on the matter.

Mr New has also requested that Mr New and his associated entities, and the partnership receives a release and acknowledgment that no further claims are to be made in respect of building costs and management fees and that tax invoices will be produced by Furman Constructions Pty Ltd for the adjustments that have been implemented.

Finally Mr New has mentioned that there are further works required at Mordialloc to correct certain deficiencies and requests that this be done at the builder's expense.

Should you have any queries in respect to the above items please contact me at your earliest convenience.

239 Mr Rathner responded to the email above on 9 November 2010, as follows;

Mr Furman is not in agreement with your proposal in relation to the loan accounts. Mr Furman reiterates that he believes a proportional repayment of the loan account is a fair and equitable manner in dealing with the loan accounts.

In relation to your comment concerning the option of Mr Furman acquiring a property at valuation in reduction of his loan account, Mr Furman is of the view that if it is acceptable in principle, then the timing of this occurring should not be relevant. Accordingly, the need to realise all other properties before his loan account can be offset by an assumption of a property should be able to occur at any time and a delay as proposed is not necessary.

Concerning the Bank penalty interest, we clarify the bank sought the Mordialloc properties as additional security. The Bank did not have the property as security at the time. The request was resisted by Mr Furman and subsequently the Bank conceded. We note that when the facilities came up for renewal earlier this year, the Bank again sought the Mordialloc properties as security. Mr Furman again pointed out the additional security was not necessary and the documents were reissued by the Bank excluding Mordialloc.

Please advise us of the progress of the rebate of the penalty interest by the Bank.

We await receipt of the 2009 amended accounts prior to considering the request for the release.

Mr Furman is in agreement to providing an invoice if appropriate relating to additional management fees.

Would you please provide the list of deficiencies referred to in your email so that they can be considered by Mr Furman.

240 On 22 November 2010, Mr Lebovits wrote to Mr Rathner, which, among other things, enclosed the 2009 accounts to be provided to Mr Furman to sign. He stated "The accounts incorporate all the agreed adjustments".

241 On 25 November 2010, Mr Saltzman wrote to Mr Rathner, stating, among other things:

As requested, I now advise and confirm as follows:

I have reviewed in detail, the 2009 year end set of Financial Accounts and the Taxation return for the Partnership. I confirm that the adjusting entries and the additional items to have been included, have now been adjusted for. They appear to be wholly in order.

242 On 10 December 2010, Mr Lebovits sent an email to Mr Rathner, as follows:

With respect to our telephone conversation in the past days I confirm that the loan account adjustments to Furman Constructions Pty Ltd is inclusive of GST.

I have arranged for M Furman to attend my office to sign the accounts on Tuesday morning.

243 On 14 December 2010, Mr Rathner wrote to Mr Lebovits, as follows:

Mr Furman has signed the 2009 financial statements. I will post the original to you today.

244 The Lowe Lippman correspondence file after this date shows that most of the correspondence between Lowe Lippman and Green & Sternfeld related to the preparation of the 2010 financial accounts, at least until Mr Furman raised further complaints regarding the financial affairs of the partnership in mid 2011. However, the following documents refer to relevant matters concerning the 2009 accounts:

(a) an email exchange between Mr Perry Rosenbaum, the solicitor engaged to sell certain partnerships properties and Mr Lebovits on 21 February 2011 and 24 February 2011, where Mr Lebovits told him that the proceeds of a sale of one of the Croydon properties were to be distributed as follows:

with the balance of the funds to be distributed as follows:

(b) on 18 March 2011 Mr Lebovits sent an email to Mr Furman (copied to Mr Rathner), which states, among other things:

We have a number of pending items requested from you previously and we still require a response.

(a) Furman Constructions Pty Ltd to provide the partnership with the invoices for the period 1 December 2008 to 20 April 2009;

(b) Furman Constructions to provide the partnership with a tax invoice for the final adjustments for the construction and building fees.

245 The following observations can be made following an analysis of the above correspondence (along with the largely uncontested evidence of Mr Lebovits and the concessions made by Mr Rathner in his evidence):

(a) by early 2009 Mr New and Mr Furman had evidently agreed (although there was no direct evidence as such) that the partnership would not undertake any further property development projects;

(b) Mr Furman had expressed some concerns regarding the accounting for the partnership projects, in particular, whether Furman Constructions had received all funds that were due to it for the construction and project management for the various projects, how any GST refunds had been applied, the accounting for the profits of the Charman Road projects, the source of the capital funding for the partnership projects, and the size of the respective partners' loan balances;

(c) Mr New proposed, and Mr Furman agreed, that Green & Sternfeld and Lowe Lippman would work together to identify, investigate and resolve all outstanding issues and concerns regarding the financial affairs of the partnership;

(d) Mr Saltzman, and later Mr Rathner, sought from Green & Sternfeld, and were provided with extensive documentation regarding the financial affairs of the partnership, and there was extensive correspondence and dialogue between Mr Lebovits and Mr Rathner in particular regarding, among other things, the issues referred to in paragraph (b) above;

(e) contrary to the contentions advanced on behalf of MYR during the course of this proceeding, Mr Rathner's retainer extended well beyond undertaking a review of the construction costs for each of the partnership projects, but extended to reviewing the profit and loss schedules for each of the projects, reviewing the payments and accounting of interest on the Westpac bill facilities, reviewing the transactions making up the LHND loan account, reviewing the GST regarding funds received and disbursed by the partnership, and negotiating on Mr Furman's behalf regarding the amounts said to be owing by the partnership to both Furman Constructions and MYR in respect of construction costs and profit shares with respect to the partnership projects and the Charman Road projects;

(f) Green & Sternfeld provided Lowe Lippman with all of the information requested by them: indeed it was usually Mr Furman that was remiss or tardy in providing information required and requested by Green & Sternfeld to verify the construction costs claimed by Furman Constructions;

(g) Mr Furman was kept fully informed of the progress of Mr Rathner's investigations and negotiations and had a full understanding of the issues and matters being considered and discussed by Mr Rathner and Mr Lebovits; and

(h) with some exceptions (such as accounting for an overpayment in respect of construction costs on the Poath Road project) most of the adjustments to the accounts made over the course of the Rathner review were in favour of Mr Furman's entities, primarily in recognition of claims by Furman Constructions for construction expenses, but also an agreed adjustment in respect of the profit share for the Charman Road projects. Further concessions were also made by Green & Sternfeld during the course of the Rathner review: Green & Sternfeld accepted Furman Constructions' claims in respect of various construction expenses for the Mordialloc project said to have been paid in cash or otherwise unverified. It is uncertain whether Green & Sternfeld's concerns regarding Furman Construction's receipt of approximately $225,000 of GST refunds said to be owing to the partnership were addressed in the course of resolving the amount due to Furman Constructions in respect of construction costs, or were simply not pressed;

(i) Mr New made a further concession to Mr Furman with respect to the question of how the sale proceeds of the unsold partnership properties were to be applied after the retirement of debt owing to Westpac and the payment of the fees owing to Green & Sternfeld, Lowe Lippman and Mr Rosenbaum. Mr New's position was that the partner's loan account balances should be equalised first: that is, all proceeds of sale ought to be paid in reduction of the LHND loan account until it was reduced to the same level of the Furman Constructions loan account. Mr Furman's position was that there should be a proportionate reduction of the partner's loan account balances. It appears that Mr Furman's position prevailed, and this was reflected in the final disbursement of the proceeds of sale of one of the Croydon properties in February 2011;

(j) Mr Saltzman reviewed the 2009 accounts to check whether the adjustments for the parties' loan accounts negotiated between Mr Furman and Mr New, via their accountants had been made, and would not have arranged for Mr Furman to sign the 2009 accounts unless he was satisfied that:

(ii) the accounts reflected and incorporated the adjustments made to the entitlements of the Furman interests and the New interests that had been discussed during the course of the Rathner review.

246 It is illustrative to see how the correspondence and negotiations referred to above were ultimately reflected in successive versions of the 2009 accounts. In the first version of the 2009 accounts, forwarded by Mr Lebovits to Mr Saltzman on 24 August 2009, in response to Mr Saltzman's letter of 18 August 2009, the draft balance sheet revealed the following:

(a) a loan account balance of LHND of $1,942,861.08, and LHND's share of partners' funds of $187,561.37 (total $2,130,442.30);

(b) a net loan account balance in favour of Furman Constructions of $205,664, and MYR's share of partners' funds of $187,581.37 (total $393,225.37); and

(c) therefore, a difference between LHND's claims on partnership assets and the Furman interests' claims of $1,737,217.00.

247 A further version of the 2009 accounts was forwarded by Mr Lebovits to Mr Rathner on 16 September 2010. These accounts were said to have been amended to take into account the adjustments agreed to by Mr Lebovits and Mr Rathner in the course of telephone discussions which took place between Mr Lebovits and Mr Rathner on 2 August 2010 and 3 September 2010. The draft balance sheet included in this version of the 2009 accounts provided as follows:

(a) a loan account balance of LHND of $2,014,829.57. However, LHND's claims upon the partnership were now $1,955,431.10 by reason of there being negative partners' funds;

(b) the loan account balances of Furman Constructions totalling $648,194, with the net claims of the Furman interests now being $588,795.59; and

(c) therefore, a difference between LHND's claims and the Furman interests' claims of $1,366,635.51.

248 The next version of the 2009 accounts was provided by Mr Lebovits to Mr Rathner on or about 22 November 2010. This version is identical to the financial version signed by Mr Furman and annexed to the partnership's tax return. The only material change between this version and the version provided on 16 September 2010 is that in the final version, LHND's loan balance was reduced by $40,000, and the loan balance in favour of Furman Constructions was increased by that amount. This adjustment reflected the agreement that had been reached regarding the Furman interests' entitlement to profits from the Charman Road joint ventures, and further reduced the discrepancy in the entitlements of the respective partners to $1,286,655.60, representing an adjustment of $450,561.40 in favour of the Furman interests over the course of the Rathner review.

249 Accordingly, taking as a whole the following matters:

(a) the evidence regarding the discussions between Mr Furman and Mr New in early 2009;

(b) the largely uncontested evidence of Mr Lebovits regarding the Rathner review and its outcomes;

(c) the largely unconvincing and evasive evidence of Mr Furman in relation to what tasks he instructed Mr Rathner to carry out, what the understood from the information he received from Mr Rathner, and the instructions he gave to Mr Rather;

(d) the concessions made by Mr Rathner regarding the scope of his review and his consultations with and instructions from Mr Furman;

(e) the voluminous and detailed contemporaneous documentation regarding the issues and matters identified and investigated by both Green & Sternfeld and Lowe Lippman during the course of the review and the nature and range of the issues reviewed;

(f) the negotiations between Mr Rathner on behalf of Mr Furman and Mr Lebovits on behalf of Mr New regarding such matters as acceptance of claims for construction expenses, accounting for GST refunds paid to both LHND and Furman Constructions, the dispute between the parties regarding the Charman Road profit share, the consequent adjustments to the loan accounts of each party to reflect the outcome of the negotiation, and the agreement between the parties as to the application of the sale proceeds of partnership projects; and

(g) the fact that Mr Furman only signed the 2009 accounts after Mr Rathner told Mr Saltzman that the issues regarding Mr Furman had been "finalised"

powerfully supports the proposition that, in signing the accounts, Mr Furman was acknowledging that, in accordance with the agreement reached between him and Mr New in mid 2009, all of the issues and concerns he had regarding Furman Construction's claims as the builder of the partnership projects, and MYR's claims for profit shares in relation to each of the projects, including Charman Road, had been either satisfied, resolved or compromised.

250 In my view, the formation and terms of the relevant agreement are somewhat different than that advanced on behalf of LHND in its Amended Statement of Facts and Contentions and submissions. In my view, the agreement was not constituted by the signed 2009 accounts, or the other documents relied upon by LHND. Rather, the relevant agreement was reached between Mr New and Mr Furman prior to the commencement of the Rathner review. The background to the agreement was that Mr Furman had become increasingly concerned about the accounting for the partnership, for a range of reasons. He was concerned (justifiably, as it turned out) that Furman Constructions had not been fully reimbursed for the expenses incurred by it in constructing the developments, particularly in respect of the largest partnership project, being Mordialloc. He had a longstanding concern that he had not received the profits to which he was entitled in respect of the Charman Road projects. While there was no basis for concluding that information would not be forthcoming if he asked for it, the accounting for interest payments and GST payments and refunds was not terribly transparent to him, and was in the control of Mr New's longstanding accountants. It was apparent from some of the evidence that he was keen to realise his interest in the partnership in order to pursue other ventures. Not surprisingly, the size of the LHND loan account, in circumstances where he had guaranteed repayment of substantial debt facilities advanced by Westpac, must have been alarming. The evidence regarding his interactions with Mr New, Mr Black and Mr Lebovits, his willingness to embark upon litigation in commercial matters, along with his demeanour in the witness box all indicate a naturally suspicious orientation when it comes to identifying and protecting his commercial interests.

251 It was against this background that one must examine what was likely to have occurred during the two meetings between Mr New and Mr Furman in 2009 (the first also including Mrs New and Mrs Furman). Mr New had, in effect, bankrolled the partnership. He is an older gentleman, whose appetite for disputation and conflict appears to be less than that of Mr Furman. It is unsurprising that he would have said something along the lines that "look, we've got some family connection, let's leave it to the accountants to sort out the issues", [132] or "leave it to them and let them sort it out. We're good friends with family connections, let's not get into an argument."[133] Mr Furman agreed to that process, whereby the parties agreed that Mr Furman's accountants, Lowe Lippman, would undertake a full review of the financial affairs of the partnership, with a view to Mr Furman achieving full satisfaction regarding the entitlements of each of the parties, and that Mr New would instruct Green & Sternfeld to provide their full cooperation in that regard.

252 The intentions of the parties to achieve a full and final reconciliation of the financial position of the partnership, and the claims of the partners and related parties upon the assets of the partnership, is evidenced not only by the evidence of the conversations between Mr Furman and Mr New, but also the correspondence between Mr Saltzman and Mr Lebovits between February 2009 and August 2009, regarding what was required to be done to finalise the affairs of the partnership, and the retainer of Mr Rathner, an experienced forensic accountant.

253 In my view, notwithstanding the protestations of Mr Furman, Mr Saltzman and Mr Rathner to the contrary, the evidence supports the contention that the parties did what they agreed to do: that is, delegate to their respective accountants the task of investigating and commenting upon the issues of particular concern to Mr Furman, with a view to achieving a final agreement with respect to the true financial position of the partnership. Necessarily, it was an interactive process, whereby Mr Rathner applied his expertise to analysing the information provided to him by Green & Sternfeld and derived from the records of Furman Constructions, and queries and issues were raised by both sides along the way. However, while Mr Lebovits and Mr Rathner discussed various matters during the course of their various meetings and telephone calls, and in correspondence, it is clear that neither of them was authorised to actually make concessions or reach compromises on behalf of their respective clients. When it came to agreeing to the final amounts said to be owing in respect of construction costs, accepting claims for expenses paid in cash, the loan accounts of the parties, which were front and centre from the start, or the manner in which the sales proceeds of properties were to be applied, Mr Lebovits acted upon the instructions of Mr New. As for Mr Rathner, he made it clear in his evidence that he discussed all matters concerning his investigations with Mr Furman, and acted only upon the express instructions of Mr Furman, as one might have expected in the circumstances. Therefore, the question of the actual or ostensible authority of the accountants is not of any particular relevance.

254 It is also not significant, as contended for by MYR's submissions, that Green & Sternfeld were the partnership's accountants, and as such, could not be the agent or conduit for Mr New's interests. The facts suggest otherwise. It is apparent from the evidence, including the correspondence, that Mr Lebovits was at least for the purposes of the Rathner review and the purpose and outcome of that review, representing the New interest in any negotiations with the Furman interests, and that was well understood by Mr Furman and Mr Rathner. The fact that Green & Sternfeld were also the partnership's accountants was only relevant in that it meant, by necessity, much of the information necessary to undertake the review and negotiations was in the possession of Green & Sternfeld. However, while this fact was relied upon in support of MYR's assertions that Mr Rathner could not conduct a complete review because Green & Sternfeld had not provided him with all of the information, the missing information was never particularised, and no specific allegations have been made that Green & Sternfeld deliberately withheld information, or otherwise misled Mr Rathner or Mr Furman.

255 The process agreed by the parties in mid 2009 can be roughly divided into two phases: the "investigation" phase between August 2009 and June 2010, and the "negotiation" phase between June 2010 and November 2010, culminating in Mr Furman signing the 2009 accounts on 14 December 2010. During the investigation phase, Mr Rathner prepared a substantial report on 19 February 2010, which he updated on 4 June 2010. Mr Rathner's letter of 4 June 2010 made the following claims on behalf of Furman Constructions:

(a) the net amount due to Furman Constructions on account of outstanding construction costs and management fees was $372,824.98;

(b) an adjustment of $65,140 in Mr Furman's favour arising out of the Charman Road projects; and

(c) with regard to the draft 2009 accounts, Furman Constructions and MYR were said to be entitled to the following amounts:

We note that the 30 June 2009 draft accounts may require adjustments which will offset the project result and share of profit due to each partner.

256 Accordingly, Mr Rather was squarely putting forward Mr Furman's claims vis-à-vis the New interests, with any "settlement" of those claims to be effected through adjustments to the 2009 accounts.

257 Mr Lebovits' letter of 22 June 2010 to Mr Furman refers to a recent conversation between Mr New and Mr Furman and there being only two remaining matters of concern (presumably the unpaid construction costs and the claim in respect of the Charman Road profits). Mr Lebovits suggested a meeting between all stakeholders with a view to resolving all matters of concern to him and Mr New.

258 It appears that this meeting did not occur. Rather, what followed was the lengthy telephone conversation (or, according to Mr Furman, face to face discussion) between Mr Lebovits and Mr Furman on 23 June 2010, referred to at paragraph 82(b) of Mr Lebovits' 7 December 2012 affidavit. The contents of this conversation are not seriously in dispute. What is apparent is that the following matters were discussed:

(a) the profit share for Charman Road (which Mr Lebovits said needed to be resolved between Mr Furman and Mr New);

(b) the accounting for the profits for Charman Road and Poath Road (which Mr Lebovits said were now accounted for in the partnership accounts);

(c) there were large discrepancies between Green & Sternfeld's and Lowe Lippman's position with respect to the partnership accounts, but Mr Lebovits expected these could be resolved amicably between him and Mr Rathner;

(d) Mr Furman's position was that if the investigation "went Gideon Rathner's way" he did not want to pay Green & Sternfeld's fees. Mr Lebovits did not accept this position;

(e) Mr Furman wanted the partnership to pay Lowe Lippman's fees for the Rathner review;

(f) Mr Furman believed that Mr New had been using funds advanced under the Westpac bill facilities for his own purposes. Mr Lebovits responded that Mr Saltzman had told him in July 2009 that he was satisfied with the LHND loan account and Mr Rathner had conducted a full review; and

(g) Mr Lebovits was aware that monies were outstanding to Furman Constructions, but that Mr Rathner was conducting a full analysis, following which Mr Lebovits and Mr Rathner would amicably resolve any outstanding matters.

259 Accordingly, as at June/July 2010, the following matters were in dispute between the parties:

(a) Furman Constructions' entitlement to profits from the development of the Charman Road projects;

(b) the amount outstanding in relation to construction costs ($372,824 according to Lowe Lippman, compared with $123,785 according to Green & Sternfeld's letter of 12 July 2010); and

(c) payment of Green & Sternfeld's and Lowe Lippman's fees by the partnership.

260 By 16 September 2009, an agreement had been reached between the parties in respect of the amounts said to be owing to Furman Constructions, being $276,284, which included GST and the reimbursement of the deposit paid by Mr Furman for the Croydon property. By 27 October 2010 the parties had reached agreement with respect to Mr Furman's claim that he had been underpaid $65,140 in respect of his profit share for Charman Road. Mr Furman's claim was compromised with an adjustment in his favour of $40,000. Also by that date, it was agreed that the sale proceeds of partnership properties would be applied to pay both Green & Sternfeld's and Lowe Lippman's outstanding fees. The only issue which remained outstanding was whether the remaining sale proceeds should be applied to the LHND loan account alone, until the balance was equal to that of Furman Constructions, or whether there should be a proportional reduction of the loan balances, in accordance with Mr Furman's position. Ultimately, Mr Furman's position prevailed, although it is not entirely clear when the parties agreed upon that particular issue. In all probability, that agreement was reached prior to Mr Furman signing the 2009 accounts.

261 Accordingly, Mr Furman's signing of the 2009 accounts represented his acknowledgement that the process of investigation and negotiation agreed to be undertaken in 2009 was complete, and that the various claims made by him and on behalf of his related entities had been compromised with Mr New and his entities.

262 The conduct of Mr Furman in signing the 2009 accounts assumes particular significance, not because it in itself constituted the agreement between the parties, but because it signified that the process of investigation and negotiation regarding the financial entitlements of the parties had reached its conclusion, and there remained no outstanding disputes between them in that regard. Along the way, as well as making the necessary adjustments to the loan accounts to reflect the compromises by the parties, other agreements were made and performed: that is, an agreement regarding the application of the sales proceeds of partnership properties, and the execution by Mr Furman of the rollover documentation for the Westpac bill facility once he was satisfied that Mr Rathner had conducted a full verification of drawdowns, interest and fee payments on the bill facilities, and had reconciled these with the partnership and LHND accounts. These agreement were both put into effect in February 2011 with the sale of one of the Croydon properties, the disbursement of the proceeds of that sale in accordance with the agreement, and the execution of the Westpac bill facility secured over the properties at Hastings and Croydon.

263 In reaching the conclusion that Mr Furman was bound by the 2009 accounts by reason of a series of agreements, as evidenced by conversations between him and Mr New, the correspondence between the accountants, the successive adjustments made to the 2009 accounts to give effect to the compromise of Mr Furman's claims, and the application of the sale proceeds of the Croydon property in February 2011, I accept that I have departed from the traditional "offer/acceptance/consideration" analysis of contract formation. However, while I acknowledge that this framework for determining whether the parties have reached an agreement (or agreements) still has its place, it is apparent from the authorities that a more "global" approach to negotiations between parties may to be adopted in order to determine whether objectively and having regard to the totality of dealings between the parties, they should be considered to have entered into a contractual relationship without enquiring too closely into the formalities of offer and acceptance.[134]

264 In Vroon BV v Fosters Brewing Group,[135] Ormiston J, while emphasising that offer and acceptance was the primary mode of ascertaining the existence of a contract, was prepared to conclude that the existence of a contract may be evidenced otherwise than by offer and acceptance, and referred to the American Restatement of Contracts, Second 22(2), which states:

A manifestation of mutual assent may be made even though neither offer or acceptance can be identified and even though the moment of formation cannot be determined.

265 Also, it should be noted, in relation to whether, objectively speaking, the parties intended by their words and conduct to be legally bound by a particular position, that where the parties are in a commercial relationship and are negotiating about important matters, the onus of establishing that there is an intention to enter into a legally binding contract might be more readily discharged than might ordinarily be the case.[136]

266 Finally, it should not be disregarded that, while the correspondence, discussions and negotiations between Mr Lebovits and Mr Rathner were largely courteous and amicable, these discussions and negotiations were initiated by, and took place in the context of a dispute between the parties, in particular, in the context of Mr Furman complaining that the accounts of the partnership did not adequately recognise his entities' claims to the assets of the partnership. While, at the initial stage of the investigation process, those claims were vague and unparticularised, it is apparent from the letter from Mr Saltzman to Mr Lebovits dated 28 April 2009 that there was a dispute, or a potential dispute between the parties regarding the payment of GST refunds for the Caulfield South project being paid into the bank account of LHND. Indeed, the letter stated as follows:

We have instructions to demand that these accounts be repaid to the Partnership bank account within 7 days.

Failing which, we advise that the matter will be reviewed further for appropriate action.

267 It was in the context of this correspondence that Mr New and Mr Furman met in mid 2009, and, at Mr New's urging, Mr Furman agreed that his concerns should be left to the accountants to resolve. In effect, the purpose of Mr Rathner's retainer was not merely to investigate the partnership's financial affairs, but also to particularise and verify the claims able to be made by Mr Furman's entities against the partnership, such that they could be reviewed by Green & Sternfeld, and agreed, rejected, or compromised between Mr Furman and Mr New. And that was precisely what in fact occurred, and, by reason of the manner in which the parties, through the accountants, agreed that these matters would be recorded, that is, by adjustments to the parties' loan accounts, Mr Furman's signing of the 2009 accounts signified his acknowledgement of the various agreements that had been made along the way.

268 It is well accepted that a compromise of a claim, or settlement of a dispute, amounts to valuable consideration, even in circumstances where no proceeding has been issued or expressly threatened.[137] Indeed, the current case could be considered to be a classic case of "accord and satisfaction", whereby Mr Furman, on behalf of Furman Constructions, promised to abandon any claim it may have against the partnership in respect of, among other things, construction and management fees, in exchange for adjustments being made to the partnership loan accounts. That no actual cash changed hands is irrelevant, as it is clear that the parties had agreed upon the mechanism by which Furman Construction's claims would be adjusted to reflect the compromise between them.

269 By seeking to re-agitate the issues investigated and determined during the course of the Rathner review from mid 2011 to the current day, Mr Furman has resiled from his agreement with Mr New that the process agreed between them would result in a final position with respect to the parties' respective entitlements to the assets of the partnership. Of course, it is not necessary for a party to establish any loss to assert or prove a breach of contract. Given that such a breach has occurred, it is arguably not the role of the Court to facilitate or endorse such a breach in the exercise of its powers, including its powers under its jurisdiction with respect to the taking of accounts, in the absence of any vitiating conduct on the part of the party asserting a breach.

270 Ultimately, the assertions made on behalf of MYR that Mr Rathner did not conduct a full and comprehensive review of the partnership's affairs are not made out, and are in fact directly contradicted by the evidence. No credible evidence was led to identify what Mr Rathner did not do, that he ought to have done in order to satisfy himself as to the accuracy of the 2009 accounts. There was no credible evidence about what information Mr Rathner did not receive from Green & Sternfeld in order to effectively carry out his retainer. The issues raised on behalf of MYR in the correspondence from mid 2011, and in the pleadings and particulars in this proceeding, were shown to be without foundation, and appear to have been agitated in order to advance Mr Furman's position in negotiations with Mr New. The cooperation of Lowe Lippman in that process, given what they knew, or ought to have known regarding what occurred in 2009 and 2010 is regrettable, and does not reflect well on the professionals involved. In particular, the claims made on MYR's behalf in 2011 and 2012 that the accountants at Lowe Lippman did not know that there was a separate loan account balance in the partnership's accounts for both Westpac and LHND at the time Mr Furman signed the 2009 accounts was particularly disingenuous.

271 One thing that ought to be kept in mind when assessing the nature, process and outcome of the Rathner review was that, while the task of examining the partnership's affairs was slow and laborious, it was not particularly conceptually complicated. What might be described as the "components" of the partnership's business are few in number and readily ascertainable. The main inputs of the business are land (the cost of which is easily identifiable), construction costs (the knowledge of which was in the domain of Mr Furman's entities, not Green & Sternfeld or Mr New), interest costs and fees associated with the Westpac bill facilities, which were subject to exhaustive review by Mr Rathner, and other sundry development expenses (professionals' fees, open space contributions, the cost of conducting VCAT proceedings and so on). The financial details of the "outputs" of the business, being the net sale proceeds of the units developed on the project, or, in the case of unsold properties, rental receipts, are also readily ascertainable. The only matter which seems more complex than the others is the question of GST, but that was an issue that Mr Furman was well and truly alert to in 2009, and was also the subject of exhaustive review by Mr Rathner.[138] Therefore, it is difficult to see how a capable and thorough professional such as Mr Rathner could have not identified, or have been misled by, discrepancies in the partnership's accounts of a material nature.

272 Mr Saltzman in his affidavit criticised the manner in which Green & Sternfeld prepared the partnership accounts as being on an "en globo" basis rather than a project by project basis with the implication that this was what was necessary in order to obtain a full understanding of the affairs of the partnership. However, that criticism lacks substance, in that the partnership accounts are merely the net result of the different partnership projects, and Mr Rathner gave evidence that he conducted a full review of the construction costs, interest payments, and GST in respect of each individual project. There was no suggestion by either Mr Saltzman or Mr Rathner that they were confused by, or did not understand the accounting for the partnership by reason of it being on a year by year basis (which would be necessary for taxation purposes in any event) rather than a project by project basis.

273 Accordingly, I have concluded that each of LHND, MYR and Furman Constructions are "bound" by the statement of assets and liabilities in the 2009 accounts, either on the basis that Mr Furman's signing of the 2009 accounts evidenced his agreement to the process agreed by him and Mr New regarding the ascertainment of the financial entitlements of their respective entities and an acknowledgement that that process had been finalised, or on the basis that there had been an accord and satisfaction. In relation to the latter, the matters which were the subject of the "accord" were the claims by Furman Constructions in respect of outstanding construction and management fees on the partnership projects (including Poath Road), and the profit share on the Charman Road projects. The "satisfaction" of these claims was Mr New's instructions to Green & Sternfeld to make certain adjustments to the 2009 accounts to reflect the compromises achieved in respect of those claims.

274 At first glance, it might be difficult to reconcile my findings that Poath Road is a partnership property with my finding that MYR is contractually bound to accept the validity of the 2009 accounts. However, as indicated in paragraph 65 above, it was apparent that Mr Furman was far more concerned about the financial outcomes rather than the accounting treatment of the various development projects. As such, in relation to the treatment of the Poath Road property, provided that Furman Constructions had been paid the amount due to it for construction and project management services, and MYR had either been paid its profit share or the profits were reflected in the accounts of the partnership, I doubt that Mr Furman would have been terribly concerned as to whether or not the partnership accounts identified Poath Road as a partnership project.

275 It is apparent from the exchange of correspondence between Green & Sternfeld and Lowe Lippman that Mr Rathner investigated the accounting for Poath Road, and Mr Furman had agreed that Poath Road had been properly accounted for (in an accounting sense, rather than a legal sense). That would have been required by Mr Furman regardless of whether Poath Road was a partnership project or a joint venture project. Indeed, Mr Furman appeared to be far more concerned about investigating the financial affairs of the Charman Road projects rather than the Poath Road project.

276 The financial outcomes for the parties in respect of Poath Road did not differ according to whether Poath Road was a partnership project or a joint venture project. Each party was entitled to a half share in the profits of the project once completed. The only material difference was that the parties' profits from the Charman Road developments were used as a capital contribution to the project, and MYR gave a guarantee to secure financing from Westpac.

277 Accordingly, while the partnership accounts for the 2004 to 2008 financial years were "wrong", in that they did not record the Poath Road property as an asset of the partnership, this does not mean that the 2009 accounts are inaccurate, such that the inclusion of Poath Road as a partnership property warrants the complete unravelling of the partnership accounts. First, by 30 June 2009, the Poath Road properties had all been sold, and the Westpac bill facilities had been discharged (the Westpac bill facility in respect of Poath Road was discharged on or about 13 August 2007 from the proceeds of the sale of unit 3, and the proceeds of sale of the final unit were deposited into the partnership bank account on or about 27 June 2008). Secondly, as noted above, Mr Furman was satisfied that the profits of the Poath Road development had been properly accounted for. Accordingly, there is no utility in ordering that the accounts be reconstructed to reflect the inclusion of Poath Road as a partnership property, and no basis for not drawing a conclusion that there had been no agreement between the parties with respect to the 2009 accounts.

278 As I have found that there was a concluded agreement between Mr New and Mr Furman, it is not strictly necessary for me to make findings with respect to the other matters relied upon by LHND, being that:

(a) by reason of Mr Furman's signing the 2009 accounts MYR represented and warranted to LHND that the accounts presented fairly the partners' financial position as at 30 June 2009;

(b) MYR is bound, by reason of the matters set out in (a) above, by the 2009 accounts as a matter of contract or by reason of a conventional estoppel;

(c) alternatively, an account was stated as at 30 June 2009 in respect of the debts, claims and demands of LHND and MYR as partners; and

(d) alternatively, the Court in the exercise of its equitable jurisdiction should be precluded from departing from the identity of the assets and liabilities of the partnership as at 30 June 2009.

279 I should indicate, however, that, in respect of LHND's claims that MYR is estopped from departing from any representation or warranty made by Mr Furman by reason of his signature upon the director's declaration in the 2009 accounts, the submissions made on behalf of MYR in that regard, in particular, regarding the absence of any evidence that LHND relied upon or suffered any meaningful detriment in relying upon any such representation, have considerable force. Further, I am doubtful as to whether the extent of any general equitable discretion with respect to the taking of accounts is sufficiently broad to deny MYR its rights as a partner to seek a full accounting of the affairs of the partnership in the absence of any binding agreement or estoppel.

280 However, a significant matter remains to be determined, being the consequences of my ruling on 22 April 2013 that the hearing of the evidence in relation to question (d) would proceed, with the relevance of any errors in the accounts to remain for consideration if I determined that, on the basis of the lay evidence, MYR was prima facie "bound" by the 2009 accounts.

281 It appears to me that, having found that MYR is bound by the 2009 accounts, then the relevance of any errors in the accounts depends upon the basis upon which I have found it was so bound:

(a) if I found there was an agreement between the parties, supported by consideration, regarding the validity of the 2009 accounts, or, an accord and satisfaction between the parties with respect to any claims between them as evidenced by the signing of the 2009 accounts (as I have done), I would need to determine whether there was any conduct on the part of the parties, and in particular LHND, which would vitiate the agreement. I note that no such vitiating conduct was advanced by MYR in its Statement of Facts and Contentions. However, I accept that I have approached this enquiry on the basis that the parties are not bound by their Statements of Facts and Contentions as if they are pleading;

(b) if I was to find that, prima facie, MYR was estopped from resiling from the 2009 accounts, the existence of errors in the accounts, and the magnitude of any such errors would be relevant to the question of whether it would be unconscionable for MYR to resile from any representation made by it to LHND by signing the 2009 accounts. MYR contends that if there are significant errors in the 2009 accounts which materially affected MYR's entitlements under the partnership, then it would not be unconscionable to rely upon the errors;

(c) if I was to find that MYR was foreclosed from reopening the 2009 accounts by reason of an account stated, the legal position is that, in the absence of a settled account (whereby there has been an actual payment from one party to another pursuant to an account stated), a party would be entitled to seek to reopen the accounts in the event of fraud, or significant errors, such that the question of the existence and magnitude of any errors in the accounts would be relevant; and

(d) if I were to accept, as contended for by LHND, that the Court, in exercising its power to take accounts, has a general discretion in equity to determine that it would not reopen the 2009 accounts, then the existence of material errors in the accounts would be relevant to the exercise of any discretion based upon equitable grounds.

282 I have found that, on the basis of the evidence, that MYR is contractually bound by the 2009 accounts. I have made that finding in the absence of any evidence of any errors in the accounts (save for the amount of approximately $78,000 conceded by Mr Lebovits at paragraph 115 above). I accept the submissions made by counsel for MYR that the failure of MYR to identify or even refer to any errors in the accounts in crossexamination and in its submissions does not offend the rule in Browne v Dunn. MYR was entitled to rely upon my ruling of 22 April 2013, following which MYR quite reasonably refrained from adducing evidence and cross-examining witnesses regarding alleged errors in the accounts. Accordingly, MYR is not precluded from continuing to assert the existence of errors in the 2009 accounts by reason of the manner in which it conducted the hearing as contended for by counsel for LHND.

283 The difficulty that arises is as follows: given that I have found that LHND, MYR and Furman Constructions are contractually bound by the 2009 accounts, and any conduct by MYR or Furman Constructions which purports to resile from those accounts amounts to a breach of contract, what relevance, if any, does the possible existence of errors in those accounts assume? I have accepted that any material errors would be relevant to determining whether it would be, in the event that there was a basis for finding an estoppel, unconscionable for Mr Furman to resile from any representation constituted by his signing of the 2009 accounts. Similarly, if I were to find that there was an "account stated", any evidence of errors would be grounds for submitting that those accounts ought to be reopened, or would be relevant to the exercise of any residual equitable discretion, if such a residual discretion exists.

284 Accordingly, if it emerged from the evidence that Mr Furman's conduct in signing the 2009 accounts may give rise to equitable relief in favour of LHND, evidence of the existence of any material errors in the 2009 accounts, such that the amounts in the loan account balances of either partner or Furman Constructions should be substantially different than that shown in the 2009 accounts would be relevant to the exercise of my discretion regarding the conduct of the accounting for the partnership from now on. I agree that it would be incongruous for MYR to be bound in equity to erroneous accounts.

285 However, it is not immediately apparent how any material errors in the 2009 accounts can be relevant to the consequences of my finding that there is a concluded agreement at law between Mr New and Mr Furman, on behalf of their respective corporate entities, supported by valuable consideration, whether by way of accord and satisfaction, or otherwise.

286 Indeed, in circumstances where I have made a finding that the parties have reached an agreement, or, perhaps more accurately, a compromise, with respect to the assets and liabilities of the partnership, there appears to me to be a powerful argument that, regardless of any errors in the accounts, and in the absence of any vitiating conduct such as deceit or duress (none of which appears to be apparent from the evidence), the Court should not exercise its equitable discretion upon the taking of an account to permit a party to resile from a binding agreement. However, given that the hearing proceeded in circumstances where MYR was not required or permitted to rely upon its expert evidence which it contends demonstrates substantial errors in the partnership's accounts, I will seek further submissions from the parties as to the consequences of my finding of the existence of an agreement which is binding at common law. I should indicate that I would be very unlikely to be persuaded that MYR should be permitted to resile from that agreement in circumstances where the identified "errors" were merely matters of form (in the manner of the affidavit evidence and correspondence emanating from Lowe Lippman) rather than errors which would materially affect the loan balances of the parties as at 30 June 2009.

287 Accordingly, I will seek further submissions from the parties, in relation to whether I ought, given my findings that MYR is contractually bound by the statement of assets and liabilities in the 2009 accounts, and the basis upon which it is so bound, whether any evidence upon which MYR would wish to rely in respect of alleged errors in the partnership accounts would be relevant to the final determination of question (d), and, if it is not relevant, whether there would be any utility in permitting MYR to rely upon that evidence.

288 Finally, during the course of the submissions made on behalf of counsel, I did query whether there had been sufficient evidence adduced by the parties to enable me to determine any of the other preliminary questions. While there was no agreement as to that matter, as a result of my findings, I believe that the following questions can be answered, as follows:

(f) Whether

(1) ...

(2) the sum of $85,225.00, paid by the partnership under direction of authority dated 25 February 2011 to Green & Sternfeld, was a sum properly and actually incurred by the partnership:

Yes.

(3) Whether the fees paid by the partnership to Lowe Lippman Accountants for invoices 129533 for $65,913.75 and 140557 for $25,762.55 were fees properly and reasonably incurred by the partnership:

Yes, pursuant to the agreement between LHND, MYR and Furman Constructions with respect to the finalisation of the 2009 accounts

(g) Whether:

(1) any monies were paid to the plaintiff by the Australian Tax Office as GST credits payable to the partnership and referable to partnership projects (excluding amounts paid to Westpac account 033 000 232 232:

Yes.

(h) If the Westpac Banking Corporation bill facility is not a liability of the partnership and the interest expense payable thereon is not an expense of the partnership, whether the plaintiff is entitled to interest pursuant to section 28(3) of the Partnership Act 1958 on advances made by the plaintiff to the capital of the partnership:

Not applicable.

(i) Whether the defendant should be liable to pay penalty interest and any charges that have accrued on the Westpac Banking Corporation bill facility by reason of any failure on the part of the defendant or its director Mr Furman to provide further security and/or a guarantee to Westpac for that facility.

289 In relation to question (i), while I am prepared to hear further argument on the matter, my preliminary view is that, given that Mr Furman's position that Westpac was seeking excess security for the Westpac bill facility ultimately found favour with Westpac, Mr Furman's conduct in refusing to execute any facility which sought unnecessary security to be provided does not appear to have been excessively unreasonable. Similarly, Mr New and Green & Sternfeld went to considerable efforts to attempt to persuade Westpac to refund the penalty interest charged to the partnership. Accordingly, my preliminary view is that the penalty interest should be treated as an ordinary expense of the partnership.

[1] Exhibit "RL-1", tab 12 to the affidavit of Robert Lebovits affirmed 7 December 2012.

[2] The draft 2010 accounts show little change in the relevant loan balances.

[3] See exhibit "DB-1" to the affidavit of Douglas Black affirmed 7 December 2012.

[17] Exhibit "DB-1" to the affidavit of Douglas Black affirmed on 7 December 2012.

[20] Exhibit "RL-1" (tab 11) to the affidavit of Robert Lebovits sworn 7 December 2012.

[24] See exhibit "MS-2" to the affidavit of Mark Saltzman sworn on 30 January 2013.

[25] Exhibit "MS-2" to his 30 January 2013 affidavit.

[26] Exhibit "RL-1", tab 23 to the affidavit of Robert Lebovits of 7 December 2012.

[27] At paragraphs 66 to 68 of his 30 January 2013 affidavit.

[28] Exhibit "RL-1", tab 22 to the affidavit of Robert Lebovits affirmed on 7 December 2012.

[29] Paragraph 37 of his affidavit affirmed on 7 December 2012.

[30] Exhibit "RL-1", tab 31 to the affidavit affirmed by Robert Lebovits on 7 December 2012.

[36] T253, 6-10; T254, 27-28; T256, 1-12.

[48] T263, 20-25; T287, 28-30; T288, 4-8.

[53] Letters dated 16 and 23 November 2009.

[63] T338, 19-29; T339, 19-22, 27-31; T340, 1.

[77] T385, 14, 31; T386, 1-9; T458, 5-24.

[78] T460, 14, 31; T461, 1-4; T464, 23-29.

[90] T487, 12-31; T488; T489; T490; T491, 1-7.

[96] Exhibit "RL1", tab 48 to the exhibit of Robert Lebovits of 7 December 2012.

[121] T429, 7-11; T430, 20-21; T433, 1-2.

[128] All correspondence referred to in this and subsequent paragraphs form part of exhibit "MS-2" to the affidavit of Mark Saltzman sworn 30 January 2013, unless otherwise indicated.

[129] see exhibit "MS-3" to the affidavit of Mark Saltzman sworn 30 January 2013.

[130] Exhibit "RL-1" tab 42 to the affidavit of Robert Lebovits affirmed 7 December 2012.

[131] Exhibit "RL-1", tab 48 to the affidavit of Robert Lebovits affirmed on 7 December 2012.

[134] see Maxitherm Boilers Pty Ltd v Pacific Dunlop Ltd [1998] 4 VR 559 at 567.

[135] [1994] VicRp 53; [1994] 2 VR 32, 79-83.

[136] see Shahid v The Australian College of Dermatologists [2007] FCA 693, [298]-[308], Edwards v Skyway Ltd [1964] 1 WLR 349, Toyota Motor Corp Aust Ltd v Ken Morgan Motors Pty Ltd [1994] VicRp 55; [1994] 2 VR 106, at 177.

[137] see Seddon NC and MP Ellinghaus Cheshire & Fifoot's Law of Contract, Ninth Australian Edition (2008) at [4.24].

[138] Queries and issues regarding GST were raised in letters from Lowe Lippman to Green & Sternfeld on 6 February 2009, 28 April 2009, 4 May 2009, 23 October 2009, 16 November 2009, 21 December 2009 and 19 February 2010, and were also referred to in letters from Green & Sternfeld to Lowe Lippman on 17 April 2009, 29 April 2009, 24 August 2009, 28 August 2009, 29 September 2009, 23 November 2009, and 8 December 2009.